Affluent older adults are worried about what health care costs, including long-term care
expenses, could do to their carefully laid retirement plans. Yet only about
half of those who work with a financial adviser have discussed their fears
because they consider health care a personal matter, according to a new survey.
Nearly three out of four (73%) older adults list
out-of-control health care costs as one of their top fears in retirement, and
64% of future retirees say they are "terrified" about what health
care costs may do to their retirement plans, according to the annual
health care survey from Nationwide Retirement Institute released Monday.
The results were based on a Harris Poll online survey of
more than 1,000 adults over age 50 with a household income of at least
$150,000. Although this is the sixth year of the Nationwide health care survey,
it is the first time that the Nationwide Retirement Institute has focused on
affluent adults, who represent a prime market for financial advisers.
Despite widespread concern over health care costs, 48% of
older adults who work with a financial adviser have not discussed the subject
with their adviser. That marks a slight improvement from last year's survey,
which showed 54% of advisory clients had not discussed health care costs.
"You can't adequately plan for health care costs
without discussing the topic," said John Carter, president of retirement
plans for Nationwide. "While often considered personal, consumers and
advisers need to broach the subject and accurately plan to ensure health care
doesn't negatively impact their retirement."
The second most commonly cited reason for not discussing
health care costs with an adviser was a perception that advisers lack adequate
knowledge on the subject. Nearly 40% of older adults who work with a financial
adviser agreed with the statement: "Financial advisers do not know enough
about health care costs," according to the survey.
The survey found that 78% of consumers expect financial
advisers to offer guidance on health care costs in retirement. To help advisers
have these conversations, Nationwide offers a free personalized health care assessment tool that
provides personalized cost estimates to help advisers and clients estimate
future medical and long-term care expenses.
"There is tremendous upside potential for advisers who
want to grow their business and become a trusted resource," Mr. Carter
said in an interview. "We have tools to help advisers educate and
communicate critical information in a professional, research-driven way."
The survey shows that when people do talk with their
advisers, they feel more confident about their retirement plans and where the
money will come from to pay for health care expenses.
The Nationwide survey also found that while nearly 90% of
older adults plan to rely on Medicare to cover much of their health care costs
in retirement, a majority of survey respondents admitted they don't know enough
about how the government program works. In fact, many could not correctly
answer some basic questions about Medicare benefits.
For example, 53% of respondents did not know that Medicare
Part B, which pays for doctors' fees and outpatient services, is not free, and
29% did not realize that Medicare premiums are not the same for everyone.
Higher-income retirees pay more. In addition, nearly a quarter of
respondents did not know there are specific deadlines to enroll in Medicare.
"It's another huge opportunity for advisers to be in
that niche to answer those questions," Mr. Carter said
The survey found that most future retirees are taking steps
to save for health care costs in retirement, including building up their savings
accounts (59%), investing (56%), increasing their 401(k) contributions (46%)
and paying off credit card debt and loans (36%).
But while nearly half of employed affluent adults have
access to a health savings account (HSA) through their employer, only 30%
contribute to the HSAs, and few fully leverage HSAs' triple tax break. Of those
who do contribute to an HSA, only 10% maximize the accounts by using them as
long-term savings vehicles. Unused HSA funds can be rolled over from year to
year and can be used tax-free to pay for future health care costs in
retirement, which in turn can reduce future income taxes and possibly reduce
future Medicare premiums.
Advisers can help clients by creating personalized health
care costs estimates, projecting savings needs for those costs and
recommending funding sources such as HSAs, insurance, Social
Security and Medicare. Advisers should also suggest that clients discuss
potential health care needs and costs with family members to create a truly
holistic retirement plan.
here for the original article from Investment News.