Traditional health care plans failed to incorporate variables such as longevity, health care costs, and long-term care into retirement plans; however, the financial industry is evolving, and many firms are now utilizing these data points to create a more holistic approach to planning.
With just a few client inputs, you can create personalized reports that provide life expectancy, lifetime health care costs (Medicare Parts A and B, Medicare Part D, supplementary insurance, dental, and out-of-pockets), Social Security income, and long-term care expenses.
Simply put, Americans nearing retirement have questions about Social Security and health care. Advisors who gain expertise and initiate client conversations will not only be able to provide answers and solutions, but also generate new and sustainable business for their practice.
By using actuarial data, advisors can illustrate the impact of health care costs on retirement budgets, introduce the potential savings gap, and discuss strategies to fund the expense.
While other determining factors must be weighed, the basic planning process is quite simple.
- Estimate life expectancy.
- Calculate Social Security PIA.
- Review filing options.
- Project health care costs (including how much will be deducted from Social Security).
- Uncover savings gap.
- Review and estimate retirement income sources to account for means testing.
- Offer products to address the gap.
Additional reports provide advisors with important information about the impact of Medicare means testing and long-term care costs.
Utilizing the Data
Here is a small example of the data you will receive. This table represents a 55-year-old male living in Massachusetts.
|Projected health care costs forMedicare Parts A, B, D, and supplemental insurance||$366,293|
|Medicare Part B deductions from Social Security||$108,262|
|Unfunded health care costs||$258,031|
|One-time Investment (earning 6% annually)||$68,215|
As the data reveals, this person will need almost $260,000 to cover basic health care (not counting out-of-pockets) throughout retirement.
That may sound like a lot of money, but an educated advisor can make the difference.
The platform provides a series of funding options – including increasing Social Security contributions – to help ensure your client is prepared. This is where your expertise in product management will emerge. When clients realize how much health care is going to cost in retirement, it will be up to you to provide stable investment solutions to offset this expense. (It is important to note that the software has a host of variables that can be manipulated to create a funding plan, including risk tolerance, investment time horizon, and contributions from pensions and working in retirement.)
Here is the difference an advisor can make:
|Projected health care costs forMedicare Parts A, B, D, and supplemental insurance||$321,359|
|Medicare Part B deductions from Social Security||$103,391|
|Unfunded health care costs||$217,968|
|One-time Investment (earning 6% annually)||$55,299|
As the table indicates, by delaying retirement for two years and retiring in Maine instead of Massachusetts, the client saves around $45,000 in health care costs, and fund these impending expenses with an investment of around $13,000 less.
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