Here's the latest riddle in retirement planning: What is one of pre-retirees' biggest fears that they don't discuss with their financial adviser? Answer: health care
A new survey by Nationwide Financial released Monday says nearly half of high-net worth Americans who are close to retirement say they are “terrified” of what health care costs may do to their retirement plans, yet 38% say they have not discussed retirement health care costs with a financial.
Survey respondents — who were age 55 or older with household assets of $250,000 or more — estimated that Medicare will pay for 68% of their health care costs in retirement. How did they come up with that estimate? Most of them guessed.
But what they don't know can hurt them. Medicare actually covers only about 51% of health care costs, according to the Employee Benefits Research Institute. Most survey respondents estimated their per-person cost would be about $5,600 per year. According to the annual
Fidelity Investments annual survey of retiree health care costs, it's about double that amount.
“Many people don't have a good grasp of actual healthcare costs because they've only paid a small component of those costs in their overall health premiums” during their working years, said John Carter, president of Nationwide Financial. “Those who have discussed retirement health care costs with an adviser had a better handle on costs
Carter predicts that the next evolution for financial advisers will involve expertise in Medicare and retiree health care costs. “Those advisers who take the time to learn about it will be well positioned to grow their business,” he said in an interview.
It's also a powerful retention tool. More than half of respondents to the Nationwide survey said they would be more likely to stick with their current adviser if they could discuss how Medicare and overall health care costs could affect their retirement plan.
Last summer, Nationwide Financial unveiled a health assessment tool to help advisers develop discussions with their clients on this important topic. It's free to advisers and the recommendations are not product-specific. I'll tell you more about it in my Focus on Retirement column that will appear in the May 14 print edition of InvestmentNews.
