Helping Senior Clients Prepare for Health Shocks in Retirement

As advisors work to help seniors preparing for retirement, it’s essential to be anticipating healthcare costs above many other expenses. A healthy 65-year-old couple retiring in 2017 was expected to need over $400,000 for health care costs alone during retirement. For those approaching retirement age but not quite there yet, this number could easily look more like $500,000 or more in a few short years. Does that still sound unrealistic? Here are  just a few of the budget-busting healthcare expenses that make financial planning for seniors such a delicate and critical need in the market.

Insurance Premiums

Many seniors, and perhaps their advisors, think that health insurance premiums won’t be a concern in retirement thanks to Medicare. However, not all the care and coverage associated with Medicare comes for free. Medicare Part A covers essential hospital stay costs for emergency needs, while Part B covers up to 80% of the cost of preventative care, medical supplies, doctor visits, and more. But depending on what is needed, that extra 20% can be a big bill. In fact, the out-of-pocket expenditure for the same 65-year old-couple is expected to be around an additional $83,000 throughout retirement.

This is why some retirees choose to pay extra for Medicare Part C and Medicare Part D or buy private supplemental coverage instead. Regardless of the exact combo that’s a right fit for your client, the average retired couple today spends an average of $260,000 on premiums alone over the course of their retirement. This cost is expected to increase exponentially every year.

Chronic Diseases

Approximately 80% of older adults have one chronic disease, and 77% have two or more. For seniors, more than two-thirds of healthcare expenses are usually related to the management of chronic diseases like heart disease, cancer, chronic bronchitis, diabetes, or recovering from a stroke. Some might know about managing these conditions while preparing for retirement, but others may not be expecting to have lasting conditions. This can make accommodating those expenses a challenge when they do show up, on top of the stress of the condition itself.

Unexpected Injury

The sudden onset of a chronic condition isn’t the only health need that can catch a senior citizen unawares. Right now, Medicare alone spends $30 billion a year caring for seniors who have suffered a fall, and the National Council on Aging projects this cost will grow to $59 billion by 2020. Falls are the leading cause of fractures, trauma-related hospital admissions, and injury deaths for senior citizens. 46% of fatal falls cause death because of a traumatic brain injury. Even when a blow to the head during a fall isn’t fatal, it can in turn open the door to more lasting problems like dementia.

Prescription Drugs

Whether an older adult has a chronic condition or just needs a prescription for a little while, the cost of these medicines can add up quickly. Some cancer-treating prescriptions can cost over $11,000 a year for a single drug, even after insurance is applied. Common prescriptions for arthritis all usually cost more than $4,000 a year.  Respiratory drugs for conditions like asthma and bronchitis usually cost around $140 per refill. Those taking on the responsibility of financial planning for seniors should not ignore the likelihood that these costs will only go up as conditions worsen or get more complex.

Preparing for retirement with all this in mind is intimidating to many seniors. No one who is in perfect health at 50 wants to think about the fact that in a few short years, they may be seeing a lot more of their doctors and other care providers. This is why advisors play such an important role for seniors. Not only can you help them acknowledge and prepare for this need without feeling totally alone, you can help them strategize where to find the nest egg needed to grow their savings. A life settlement is one opportunity for these clients to gain back some of the funds they’ve invested in life insurance during their younger years. If you’re curious about how this could work for your clientele, explore some of the resources in this newsletter, or just give me a call.

Case Study:

Vonnie and Carl have been married 50 years. The past few years, Vonnie has become a full- time caregiver to Carl. Carl’s dementia has progressed to the point that Vonnie is unable to leave Carl by himself. Vonnie sold Carl’s life insurance policy for $65,000 as the premiums have become a burden and Vonnie used the proceeds to hire in-home care.

Leo LaGrotte

llagrotte@lsa-llc.com

317-863-5936