When creating a retirement plan for high-net-worth clients, many advisers don't put a lot of their own effort into calculating health care costs. After all, those clients are wealthy and well-insured, and in many larger firms, doing the math — and/or getting the commission — is somebody else's job.
But for advisers serving mass-affluent and mass-market clients, the job of estimating and planning for health care costs is often theirs alone.
There are only a handful of tools out there that can help advisers take a more in-depth look at health care costs. Most off-the-shelf financial and retirement planning applications do not go into much depth on the topic.
The two tools described here are carrier agnostic but advisers who have relationships with particular insurance carriers should check with those companies as several have their own free tools available for advisers, agents and clients.
HealthView Advisor from HealthView Services
To build this financial-planning/health-risk-assessment tool, HealthView Services Inc. worked with actuarial companies to get the necessary underlying cost data associated with a wide range of diseases and conditions.
HealthView's engineering staff built the algorithms and modeling software that carry out the calculations.
To use the tool, advisers enter several key factors about their client and any partner, including their expected retirement ages and estimated life expectancy.
Although this is a touchy subject, HealthView Advisor can help the adviser address it by working with his or her clients to fill out some simple worksheets.
There are a number of “yes or no” questions, including whether the client smokes or has been diagnosed with cancer, cardiovascular disease, Type 2 diabetes, high blood pressure or high cholesterol.
Financial data, including rates of inflation and other known costs, can be adjusted.
To get a very simplified, no-obligation look at how the software crunches the numbers, advisers can go on the HealthView Advisor website and take a 10-second test drive of the RetireMark health cost calculator. This quick-and-dirty calculation can serve as a wake-up call to clients who haven't considered how much health care could cost them in retirement.
In our test, we assumed that the client was a 50-year-old male in “poor” health with a partner, also 50 but in “excellent” health (these were the only choices offered and the partner's gender is not specified).
Based on data from actuarial tables and with a few assumptions (you can read those minutiae in the footnotes on the RetireMark tool's website) the calculator projected that our man will live to 84, while the partner in excellent health will make it to 90.
Assuming the couple retires at age 65, total medical costs over the course of the remaining 19 years of life for the man in poor health would be $439,690. What's more surprising is that health care costs for the partner in excellent health — who would live six years longer —will be an estimated $649,610. The grand total for the couple would be $1,089,300.
How is that for perspective?
Advisers who work with Nationwide Financial Network can use a personal health assessment program, built by HealthView and available from Nationwide's Income Planning Desk (IPLNDESK@nationwide.com).
Retiree Healthcare Planner from Omyen Corp.
This online app attempts to answer the biggest question on most retirees' minds: How much should I set aside for health care expenses in retirement?
Rather than going by average-life-expectancy data, Omyen's Retiree Healthcare Planner uses individual-client data, including age, health history and family health history, as well as information on that person's level of physical activity and whether he or she smokes, to get a sense of what health care costs might be in retirement. Clients as young as 40 can use the program.
Advisers also get an idea of where Medicare will fit into the equation. The costs of supplemental Medicare policies are incorporated so that an adviser can perform on-the-fly hypothetical calculations.
Like many planning applications, this one makes use of sliders in the interface and allows for the adjustment of several fields without the need for additional manual data input.
All this can help an adviser with the problem of sticker shock. If the total cost of a plan using one set of variables is too expensive, the adviser and client can adjust it to reflect fewer years of coverage or a different type of insurance to bring costs into line with the client's financial capacity.
Omyen continues making modifications and updates. In August, the company enhanced the program to allow advisers to analyze the costs, benefits and shortfalls of existing long-term-care policies and and hybrid policies.
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