Most financial advisors believe their clients are confident about their ability to pay for health care after they retire, but many of their clients apparently aren’t so sure and want to learn more, according to new survey results.
Nationwide Retirement Institute’s financial advisor survey finds that more than three out of four FAs (76%) say their clients are confident in their ability to pay health care costs in retirement beyond what Medicare covers. Yet more than a third of clients (35%) said they don’t feel that way.
This disconnect between advisors and clients reveals a potential opportunity to build clients’ confidence through more conversations, according to Nationwide. “Our survey reveals a gap between what advisors think and what many of their clients think when it comes to health care costs in retirement,” notes Ron Ransom, senior vice president of integrated relationship strategies for Nationwide. “The rising costs of health care impacts everyone and many clients are worried. Advisors can build their confidence by having more conversations about their plan to cover those health care costs.”
The online survey of 252 FAs also finds that 72% of advisors report that paying health care costs in retirement is a concern their clients express frequently, and 63% say their clients expect advice on health care costs in retirement.
Advisors also know there are risks in not having these conversations. In fact, 34% of advisors say their clients would likely leave them if they didn’t help them estimate and plan for out-of-pocket health care costs in retirement.
Client Feedback
A separate Nationwide consumer survey of affluent U.S. adults found that nearly three-quarters of respondents (73%) cite out-of-control health care costs as one of their top fears in retirement.
Moreover, many respondents appear to be unprepared to cover medical expenses. According to the results, 53% can’t estimate annual health care costs in retirement, while 63% are concerned that they will not have enough money to cover unplanned medical expenses. The average maximum amount respondents say they can cover in unplanned expenses today is $5,174.
Open Dialogue
More than half (52%) of those who have a financial advisor have not talked with him/her about health care costs — most commonly because they consider it a personal issue (37%).
The good news, however, is that health care financial discussions are a priority for adults working with an FA. The findings show that 78% of respondents expect their FA to provide advice on planning for health care costs in retirement, up from 73% last year. In addition, nearly half (46%) believe that it is very important (or important) to discuss health care costs in retirement with an FA or a consultant.
And while almost all FAs believe that it’s important to discuss health care costs in retirement with their clients, 75% of them admit that it is at least somewhat challenging to discuss how much clients should expect to pay in health care costs in retirement apart from Medicare.
“While often considered personal, you can’t adequately plan for health care costs without discussing the topic,” Ransom explains. “Balancing health care costs with a lifestyle goals conversation may make it easier for an advisor to best address their client’s anticipated or unanticipated needs in retirement.”
The advisor survey polled 252 FAs with at least 50% of their clients with total investable assets of $250,000 or more. It was conducted online from Oct. 16-26, 2017. The consumer survey was conducted online by The Harris Poll on behalf of The Nationwide Retirement Institute Feb. 5-22, 2018, among 1,007 U.S. adults aged 50 or older with a household income of $150,000 or more, including 553 employed affluent adults and 634 future retirees, 506 of whom work with a financial advisor.
