Retirement Watch

Health care cost estimates are crucial to retirement income planning

Nov 4, 2012 @ 12:01 am

By Mary Beth Franklin

Discussing health care costs during retirement with clients is new territory for many financial advisers, but few have the knowledge and resources to do it well.

However, four in five advisers said they know that if they have these discussions, their clients will stay with them, according to a new Nationwide Financial survey released last Monday.

“There are not enough advisers right now talking about future health care costs with their clients, but more will soon learn how or risk losing customers to an adviser who can,” said John Carter, president of distribution and sales for Nationwide Financial Services Inc.

Nearly 60% of advisers said their clients really want to talk about their health care costs during retirement, but more than half the advisers surveyed called it “challenging” or “very challenging” to discuss information about their clients' health, according to the Harris Interactive Inc. survey of 501 advisers conducted in July.

Just 30% of advisers said they are confident in their ability to estimate their clients' health care costs during retirement, according to the survey.

LACK PROPER TOOLS

“Advisers need to have these discussions with their clients,” Mr. Carter said. “Especially since 49% of the advisers we surveyed believe they could be liable for not properly preparing their clients for the costs of health care in retirement.”

One of the problems that may be keeping advisers from having these discussions is that 43% said they don't have the proper solutions or tools they need to estimate health care costs during retirement.

Out-of-pocket health care costs for an average 65-year-old couple can reach $240,000 over 20 years of retirement, according to Fidelity Investments.

And that doesn't account for long-term care. People living to 65 have a 70% chance of needing some type of long-term care in their lifetime, with an average cost for a nursing home projected to reach $265,000 per year by 2030.

BIG CONCERN FOR WOMEN

Due to their long life ex-pectancy, women are particularly concerned about health care costs — and how to cover them — during retirement.

To help simplify this complicated issue and encourage these discussions, Nationwide Financial launched the Personalized Health Care Assessment program to help advisers estimate their clients' health care expenses during retirement.

The program uses proprietary health risk analysis and up-to-date actuarial cost data, such as personal health and lifestyle information, health care costs and medical coverage, to provide a personalized cost estimate that will help clients plan for medical expenses.

Brian Fenstermaker, principal managing partner for Envision Consulting Group LLC, has been using the health care assessment tool since it first became available last year.

“As a certified financial planner, I try to do an in-depth analysis of our clients' potential costs,” he said.

"A HUGE DIFFERENCE'

“This tool allows me to make projections based on specific factors that apply to my clients,” Mr. Fenstermaker said. “It makes a huge difference in the way we do income planning and it definitely creates an "aha' moment for our clients.”

More than 5,200 advisers have used the tool so far, well beyond the 3,800 advisers that Nationwide had projected for its first year. Advisers can visit nationwidefinancial.com/ healthcare to learn more about the free tool.

Nationwide plans to add LTC cost projections to the program in the coming weeks, Mr. Carter said.

mbfranklin@investmentnews.com Twitter: @mbfretirepro

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