If the aphorism "an ounce of prevention is worth a pound of cure" is true of health care, it is surely also true of health care finance.
For that reason, financial advisors need to do for their clients what good doctors do for their patients: Plan now to prevent unwanted future problems.
Yet according to a new white paper by HealthView Services, most advisors fail to plan adequately for their clients' health care costs.
In this regard, advisors are not fully meeting their clients' needs while at the same time are missing an opportunity to forge deeper relationships with clients by addressing their genuine "pain points" — to extend the medical analogy.
And fears over health care affordability are apparently a key source of pain for American pre-retirees, 62% of whom are "terrified" of what health care costs will do to their retirement plans, according to a survey cited in the HealthView white paper, titled "Closing the Retirement Health Care Costs Planning Gap."
The advisor-oriented provider of retirement health care data and planning tools explains both the reasons why Americans are gripped by this terror, and importantly, what advisors can do to raise their level of professionalism in order to address their clients' concerns.
Bracingly, the white paper illustrates retirement health care terror with the example of a 75-year-old woman without supplemental insurance who develops a medical condition requiring multiple surgeries.
Lamentably, none of her options are good ones. She can include paying for these costly procedures with savings; tap into home equity — that is if she has a home and the home has equity; not pay, risking debt collection with added interest; or not get treated, thus forfeiting a better quality of life.
That's a scenario that advisors and clients should desperately seek to avoid — and can avoid, with even just five to 10 years of employment left during which clients can ratchet up their savings.
Unfortunately, Americans often believe they are incapable of increased savings, and their advisors "may hesitate, or find it unrealistic, to ask clients to save even more," the whitepaper asserts.
Indeed, a comprehensive HealthView study on retirement health costs released last month put the total lifetime health care tab at $395,000 for a couple retiring this year at 65, consuming 70% of the couple's lifetime Social Security benefits. A couple retiring in 10 years can expect 98% of their Social Security benefits to be consumed by health care costs.
That stark statistic comes into sharper relief when one considers that Medicare Part B is deducted directly from most retirees' Social Security checks, thus shrinking the payment.
Further slimming down Social Security paychecks is the trend toward thinner cost of living adjustments, or COLAs, which averaged around 4.5% annually from 1975 to 2008, but have averaged 1.7% from 2009 to 2014—even though health care inflation, now at about 4%, is anticipated to rise to an average of 6% in the coming years.
