Health care costs are on the rise, and retirees are bearing the brunt of the burden.
According to Health View Services, a 65-year-old couple retiring in 2016 faces $260,600 in lifetime health care expenses. And that figure doesn't even include the $130,000 for long term care insurance; retirees who purchase policies later in life will pay even more.
Even so, health care can be a tough topic to broach. For many advisors, the costs are unclear, the conversations uncomfortable and the specifics outside their areas of expertise.
"They want that annual review to be a really positive experience and don't want to spend time talking about nursing homes and medical expenses," said Quentara Costsa, CFP with Powwow, LLC.
Still, the complexity of health care presents a perfect opportunity to become a better resource and build stronger client relationships. It doesn't have to be uncomfortable to talk about health care costs.
Here are a few tips for starting one of the most important discussions to help place your clients on secure, financially sound paths.
Begin at the end
"Most people focus on the first 10 years of retirement – the fun years," says Costa. "Ask clients where their health will be in the last 10. If the advisor is willing to ask the question, most people are willing to open up."
Some clients simply don't understand the gravity of the situation. Uncertainty is worse than discomfort, though, and once they understand what's at stake, most are eager to plan accordingly.
When it comes to clients' existing knowledge, "assume a blank slate," says George Guerrero, head of financial planning for True Link Financial. From group-based retirement coverage and long term care insurance to Medicare and Medicaid, don't assume they've covered all of their bases. Ask.
Projections and simulations can also be useful, particularly for people on the fence about long term care coverage.
"Show them how they could literally lose everything," says Josh Jalinski, president of Jalinski Financial Group. "Say the premium is $5,000 per year – is it worth it to spend $100,000 to protect the other $600,000?" It's easy for clients to assume they won't face the same fates as their peers, but once they understand how much is at stake, they may feel compelled to act.
As for the timeline, "the earlier the better," says Guerrero. Clients are at their greatest earning potentials between 50 and 55 years old, they're still healthy and they likely have another 10 to 15 years to plan and save.
"We'll even talk about retirement at 45 or 35," adds Jalinski. "We begin with the end in mind with every client, and if you get someone to buy a long term care rider when they're 35, it might only cost them a couple hundred dollars per month."
Learn your clients' current plans
What plans do your clients already have in place? Depending on when they start working with you and what you've discussed, a couple may have goals, expectations and even savings they haven't brought up – particularly if you only see them once or twice per year.
"[When they're] around age 50, I start asking clients whether they've thought about their retirement living situations, transitional planning and long term care insurance," says Costa. "Sometimes they know what I'm talking about, and sometimes they have no idea."
Where will your clients live, and for how long? What roles will their children or other caretakers play? Have they considered what they'll do if they live well past 80? These are the kinds of questions you need to ask up front to avoid oversights and set the stage for the rest of the conversation.
Past health and history
Many people think they only need to discuss diseases and risk factors with their physicians, but a solid retirement plan requires at least a general knowledge of a client's health.
