You may think of yourself as a health care benefits broker or adviser. But did you also know that you are in the financial planning business?
Today's consumers are hearing that health care costs are likely to be their biggest expense in retirement. It's up to you, working with companies in health care and financial services, to help them adjust to managing their health care as carefully as they tend to their retirement savings.
Shouldering responsibility
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Consumers know that they need to shoulder much of the responsibility for their future health and wealth needs. Driving this message home are:
- Talk in Washington, D.C., of changes in entitlement programs, especially Social Security and Medicare, to maintain their viability
- Adoption by more employers of high-deductible health plans to offset rising premiums
- The shift in employer-sponsored retirement benefits from defined benefit to defined contribution plans
These developments have left many consumers concerned about how they will make ends meet in their retirement years. And they have good reason to be worried: 45 percent of those between ages 36 and 45 are at risk of running out of money for basic living expenses and out-of-pocket health care costs during retirement, according to a 2010 study by the Employee Benefit Research Institute.[1]
In short, employees of your clients need advice on how their health care costs will impact their retirement savings. Employers, in turn, are looking to you for answers.
Brokers who understand the convergence of health care and financial planning, and who can help employees project their future health care financing needs will prove invaluable to their employer clients.
Doing the numbers
Traditionally, retirement "calculators" have focused only on adding up savings, Social Security and pensions and revealing gaps between projected retirement income and projected costs, based on current income and stated choices in lifestyle (Typical question: "Do you expect to spend in retirement about as much, more than or less than you do today?").
While such tools may include health care costs into their calculus, they have only one answer: save more in a 401(k), IRA or other retirement vehicle. While often sound advice, it overlooks other ways consumers can affect their retirement costs:
- Improve health starting today. Preventive measures, such as lowering cholesterol or losing weight to minimize the risk of heart disease, can have an effect on health care costs after retirement. If someone already has a chronic health condition, sticking to a regimen of medication, exercise and good diet can also mean fewer complications – and thus lower future medical costs.
- Look at other tax-advantaged savings vehicles. Health savings accounts (HSAs) allow individuals and families to save for today's and tomorrow's eligible health care expenses. Yet, many fail to open accounts or maximize their contributions when they are enrolled in eligible high-deductible health plans.
Another way
New to the scene are tools to guide individuals through evaluations of their current health and financial status, their planned retirement age, and their desired retirement lifestyle. These tools estimate how the user's future health care costs compare to his or her projected retirement savings. OptumHealth, for example, has such a tool, which guides a person through questions about their medical and financial situations.
As individuals begin to understand where their health care future stands, brokers can help employers with valuable resources and recommendations. Some recommendations might include:
- Wellness programs such as wellness coaching, weight and stress reduction, diabetes management, on-site health centers, sponsored gym memberships, to name a few.
- Educating employees about the benefits of maximizing HSA contributions each year if covered by HSA-eligible high-deductible health plans. Education should include reminders that contributions are theirs to keep if they change jobs or health plans, and can be used to pay future eligible health care costs.
- Annual financial check-ups with representatives of financial services firms that handle employer-sponsored retirement plans and health care companies
One of the best ways to help your clients' employees prepare for retirement is to educate them on how today's choices affect their future financial well-being. Seek out partners who can help you do just that, distinguishing your services from those of your competitors.
[1] EBRI Issue Brief "The EBRI Retirement Readiness Rating:™ Retirement Income Preparation and Future Prospects" July 2010
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