Retirement Income Summit 2013 Are clients saving too much money for retirement health care?

Cadillac coverage may not be a good fit for those with specific quality-of-life wishes

May 13, 2013 @ 1:48 pm

By Jeff Benjamin

When it comes to helping clients save for healthcare costs in retirement, advisers need to balance concerns about massive medical costs with a retiree's actual quality of life – no small task.

The keynote session at the Investment News Retirement Income Summit (Twitter #RSI2013) kicked off in Chicago today with a dose of cold reality about how much it takes to finance healthcare in retirement. Employer-provided healthcare benefits for retirees is a shrinking benefit in the private sector and advisers need to help clients prepare for what could be swelling costs, according to Paul Fronstin, director of health research and education at Employee Benefit Research Institute. “Fewer workers are able to retire with benefits,” he said. “It's never been that high to begin with, but right now less than 20% of workers work for a company that provides healthcare coverage in retirement.”

With that in mind, Mr. Fronstin laid out the grim reality that a married couple could need between $163,000 and $387,000 just to cover health care costs in retirement. “We can't imagine that Medicare will become more generous,” he added. “If anything, it will become less generous.”

But physician and adviser Carolyn McClanahan, who founded Life Planning Partners Inc., warned against talking too much about medical savings while ignoring the medical realities that come with declining health. Indeed, she believes in getting clients prepared for end-of-life decisions, which includes specific quality of life guidelines.

“If you're a low healthcare user and you're willing to take the risks, you don't need to have all those dollars saved for healthcare costs,” she said. “People have to understand their health care risks and plan for that. You have to decide what an acceptable lifestyle is for you, and how much you want to go through. For example, I would not have a 60-year-old diabetic over-saving for healthcare.”

Ms. McClanahan stressed the need to create specific directives to help family and medical providers understand how much medical care an ailing individual truly wants.“Make the focus on quality of life,” she said. “We found that the number one issue for most people was being able to communicate with others.”

On the topic of Obamacare, both panelists agreed there are still more questions than answers.

Ms. McClanahan, who holds the distinction of having read the entire healthcare law, still believes the healthcare overhaul is better than nothing. “Our healthcare system is so complex that people are giving up and not going to the doctor anymore; they're going to the Internet for answers or asking friends,” she said. “Ultimately, we've got to change our own behaviors.”

Mr. Fronstin praised the introduction of healthcare exchanges for “leveling the playing field.”

“With the exchanges, you don't need your former employers to offer healthcare in retirement, you just need their money,” he said.

He cited the example of someone who quit a 20-year job at an accounting firm, where he worked for the healthcare benefits, to become a photographer. “With Obamacare you'll see a lot of your clients quitting their jobs to go and do other things,” he said.

Mr. Fronstin added that advisers will need to focus on helping clients try and keep their income levels below 400% of the poverty rate, in order to avoid paying retail prices for insurance at the exchanges.


What do you think?

View comments

Recommended for you

Upcoming Event

Oct 22


San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


Why millennial demand for ESG is falling on deaf ears

Editorial director Fred Gabriel and senior columnist Jeff Benjamin say there's a disconnect between the big appetite for environmental, social and governance funds in 401(k) plans and their offering.

Latest news & opinion

Principal-Wells Fargo retirement deal would be among largest ever

Acquisition would be in line with trend of record keepers seeking to gain scale to combat fee reduction.

ESG options scarce in 401(k) plans

There's growing interest among plan participants, but reluctance to add funds that take into account environmental, social and governance factors persists.

Ameriprise getting ready to launch its bank

Firm's advisers will soon have access to lending products such as mortgages.

Envestnet acquires MoneyGuide for $500 million

Deal will allow Envestnet to deepen integrations between MoneyGuide and its other wealth management solutions.

Morgan Stanley threatens to pull out of Nevada over state's fiduciary rule

Wirehouse says it would not be able to work there under state's current proposal.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print