When it comes to helping clients save for health care costs during retirement, financial advisers need to balance concerns about massive medical costs with a retiree's quality of life, which is no small task.
The keynote session at the Retirement In-come Summit last week kicked off with a dose of cold reality about how much it takes to finance health care during retirement.
Employer-provided health care benefits for retirees are shrinking in the private sector, and advisers need to help clients prepare for what could be swelling costs, ac-cording to Paul Fronstin, director of health research and education at the 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 health care 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 during retirement.
“We can't imagine that Medicare will become more generous,” he said. “If anything, it will become less generous.”
But physician and adviser Carolyn Mc-Clanahan, 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 be-lieves in getting clients prepared for end-of-life decisions, which in-clude specific quality-of-life guidelines.
“If you're a low health care user and you're willing to take the risks, you don't need to have all those dollars saved for health care costs. People have to understand their health care risks and plan for that,” Dr. McClanahan said.
“You have to decide what an acceptable lifestyle is for you and how much you want to go through,” she said. “For example, I would not have a 60-year-old diabetic oversaving for health care.”
SPECIFIC WISHES
Dr. 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 No. 1 issue for most people was being able to communicate with others.”
On the topic of the health care insurance reform law, both panelists agreed there are still more questions than answers.
Ms. McClanahan, who holds the distinction of having read the entire health care law, still thinks that the health care overhaul is better than nothing.
“Our health care 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 health care exchanges for “leveling the playing field.”
“With the exchanges, you don't need your former employers to offer health care in retirement; you just need their money,” he said.
"QUITTING THEIR JOBS'
Mr. Fronstin cited the example of someone who quit a 20-year job at an accounting firm, where he worked for the health care 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 to keep their income levels below 400% of the poverty rate in order to avoid paying retail prices for insurance at the exchanges.
