3 Ways to Help Clients Cover Healthcare Costs in Retirement

May 5, 2020 Share This 

Healthcare_Costs_StrategyRetirees may experience some sticker shock when it comes to healthcare costs. That’s because a 65-year-old retired couple can expect to spend $285,000 to cover their medical and healthcare costs throughout retirement. That figure is slightly higher than previous findings. The outlook for singles is comparable, with single men expected to pay $135,000, and $150,000 for a single woman.1 These numbers don’t include expenses that Medicare doesn’t cover, such as dental, vision, over-the-counter medications and long-term care.

As people age, physical health typically becomes a primary concern. Worries of potential disease and lack of mobility may be top-of-mind, but the associated price tags add to the uneasiness.

Paying the Price

Those still in the workforce likely have a cursory understanding that healthcare costs in retirement may be significant, regardless of their current health status. The question, then, shifts to how they intend to pay for it. This can be particularly thorny if retirement happens earlier than anticipated or someone finds themselves out of work and has to adjust their savings strategy.

Bridging the gap between Medicare and unplanned medical expenses may leave some scrambling to find adequate funds. But there may be ways to help your clients proactively address these challenges.

3 Suggestions Advisors May Share With Clients

Given the likely impact of healthcare costs, accounting for those potential expenses as part of a solid financial plan is essential. Ideally, these considerations are addressed well before retirement age. Rather than viewing healthcare costs as a lump sum expense that will instantly diminish their savings, it may be more appropriate for your clients to view them as a cash flow issue that may need to be stretched out over time.

These three steps may help you encourage your still-working clients to get ahead of the substantial cost of healthcare in retirement:

  • Verify employer post-retirement benefits and resources offerings. Early retirees may still be able to access healthcare coverage through their employers or through their spouses’ employers. Have your clients check with their employers to explore the possibilities.

  • Take advantage of a Health Savings Account (HSA). Employers with high-deductible healthcare plans sometimes offer HSAs so employees can leverage triple tax advantages: pre-tax/tax deductible contributions, tax-free growth and tax-free withdrawals to pay for qualified medical expenses. HSA funds may be used to cover both care and premiums, making it a pre-tax way to save for healthcare in retirement. Individuals with self-coverage can contribute up to $3,550 to an HSA per year, and that figure rises to $7,100 for family plans.2

  • Consider risk control annuities. Being able to customize investment upside potential with downside protection that fits their individual circumstances may give your clients opportunities to increase their savings nest eggs and be in a better position to pay healthcare costs in retirement. Exploring the different types of annuities and how best to apply them to an individual’s circumstances may help your clients feel more confident moving forward.

Healthcare coverage is on the minds of many Americans these days. As an advisor, you can demonstrate your value by offering guidance and strategies that help your clients move confidently into the future.

For more ideas and ways to connect with investors, read our Step by Step Guide to Helping Your Clients Achieve Financial Security and Satisfaction in Retirement. Click the button below to access your copy now.

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1CNBC.com, Health-care costs for retirees climb to $285,000, April 2, 2019

2CNBC.com, This triple tax-advantaged account might beat your 401(k) plan, Sept. 18, 2019


Topics: Retirement Planning