Managing Client Health Care Costs | Retirement Planning

We recently provided an overview of how you can help clients minimize out-of-pocket health care costs in retirement. Once you’ve helped them take steps toward ensuring they end up paying as little as possible for care costs once they retire, it’s important to take the next step and create a plan for actually managing those expenses.

It’s a common occurrence for people to spend time planning for what they will do and then to have trouble staying on track or executing the plan when the time comes. As an advisor, you can ensure that your clients not only have a plan in place, but can stick to it and execute on it when it matters most.

Annual Care Costs

Most out-of-pocket health care costs in retirement should be planned for on an annual basis. From insurance premiums to assisted care costs and prescriptions, most costs will not occur in a lump sum, but either via yearly or monthly payments.

For example, while you may help them plan for $200,000 in out-of-pocket costs in retirement, it breaks down to about $10,000 annually for a married couple (this is a low estimate, assuming no major hospitalizations or chronic disease).

To ensure clients stay on track, health care expenses should be planned for as a monthly line item that is budgeted for along with other monthly expenses and accounted for in determining what their monthly income will need to be to meet those needs.

It’s also critical that you utilize solutions available to you, such as Genivity HALO, to verify that your out-of-pocket care costs calculations are accurate, as many people underestimate this specific expense. Helping your clients better understand their individual risk will ensure that they budget appropriately each month.

Additionally, even if their care costs are projected to be on the lower end, around $10,000 per year for a married couple, it’s key that they have an accurate longevity projection. If your clients plan to retire at 65 and are projected to live until 95, then that could add an additional $100,000 to their overall costs if they were only planning for living until 85.

Other Care Costs Factors

In addition to managing care costs dependent upon longevity and disease risk, you must factor in where your clients plan to retire as well as how much Medicare will truly cover.

Geography can have a significant impact on how much health care costs are, especially for assisted care. As their advisor, understanding the cost variables per state can help you better educate your clients and even potentially help them make a different decision based upon that information.

Keeping up-to-date on Medicare coverage and surcharges is another important factor when it comes to managing care costs expenses in retirement. That’s why meeting at least annually with clients, especially as they approach retirement age, can provide you with the updated insights you need to make better recommendations.

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