In conjunction with National 401(k) day, BMO Global Asset
Management released a new episode of their podcast series, “Better
conversations. Better outcomes,” in an effort to highlight 403(b) plans.
The episode, titled “Finding opportunity in tax-exempt
markets,” shines a light on these plans, available to employees of government
and tax-exempt groups including schools, religious institutions and hospitals. It provides actionable ideas for plan advisers looking to expand businesses in
this marketplace. While the tax-exempt marketplace holds $1.6 trillion in
assets in the U.S., less than half confer with an adviser or consultant.
Other topics concerning the marketplace and covered in the podcast
include entities and organizations in the tax-exempt market, nuances of the
market, why organizations fail to have a current adviser, and how advisers may
help clients with their main needs.
Kevin Kidwell, vice president of national tax exempt sales
for OneAmerica, serves as the expert guest on the episode, where he covers the
tax-exempt market and steps an adviser can take to succeed in this particular
marketplace.
“Many advisers are looking to grow their
practices, and may already have the knowledge and expertise from working with
other retirement plans to tackle 403(b)s and other types of tax-exempt plans,”
said Ben Jones, managing director of intermediary distribution for BMO. “This
presents a great opportunity for advisers and non-profit groups alike, as needs
and skills converge.”
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Worried About Health Care Cost Inflation? It Has Only Just Begun
The health care cost inflation projections contained in HealthView
Services’ latest reporting are simply astounding; accounting for projected lifetime inflation, a
healthy retired couple at 65 can expect $600,000 in health-related expenses alone.
HealthView Services has published the 2017 Retirement Health
Care Costs Data Report.
Similar to other recent research results, the
findings frankly are grim in many respects for retirement savers. At a
minimum, the research suggests retiree health care expenses will rise at an
average annual rate of 5.47% for the next decade or more. Such a rate is almost
triple the U.S. inflation rate from 2012 to 2016, which stood at a mere 1.9%, and
more than double annual projected Social Security cost-of-living adjustments
retirees can depend on.
Other findings show, because of longer life expectancies, women
will continue to pay more for total lifetime health care than men.
It’s not all bad news, however. Beyond making a strong
argument for the use of long-term health savings accounts to address the
massive amounts of cash retirees are expected to spend on health care, for the
first time, the 2017 Report highlights and quantifies the real and measurable financial
benefits associated with behavior modification.
“Americans are not powerless when it comes to reducing costs
… Current data show that Americans with specific medical conditions, such as
type II diabetes or high blood pressure, have some control over their longevity
and health expenditures if they actively change behaviors and follow prescribed
treatments,” the firm reports. “Those who manage their conditions can extend
life expectancies, save money, and offset future medical expenses.”
The report points to one case study involving a 50-year-old
with type II diabetes. Proactive management of the condition can mitigate the associated
treatment expense and increase annual in-retirement income by almost $17,000.
Naturally, some potentially difficult lifestyle changes and careful adherence
to diabetes-care protocols will be required, but it should be encouraging to
see that real solutions are possible, even for those with challenging medical
conditions.
NEXT: Specific
expense projections are sobering
According to HealthView Services, total projected lifetime
health care premiums for Medicare Parts B and D, supplemental insurance, and
dental insurance for “a healthy 65-year-old couple retiring this year” are
expected to be $321,994 in today’s dollars, or $485,246 in future dollars that
account for inflation projections.
“Adding deductibles, copays, hearing, vision, and dental
cost sharing, that number grows to $607,662 in future dollars,” the research
states. “Medicare Part B premiums grew by 16% in 2016. The Medicare Board of
Trustees originally projected a 24% Part-B decrease for 2017, but instead,
premiums increased 10%.” The Trustees estimate a 1.3% decrease in 2018, the
report clarifies. Also, the average cost of supplemental insurance will rise at
7.12% per year, driven by annual projected premium inflation of 3.80% and an
additional annual age-based increase of 3.32%.
HealthView’s Retirement Health Care Cost Index shows that a
66-year-old couple retiring this year will require 59% of their Social Security
benefits to cover total retirement health care costs.
“A 55-year-old couple will need 92% of benefits, and
45-year-old couple, 122%,” the report warns. “Women will face higher lifetime
health care costs because they will live, on average, two years longer than
men. Expected health care costs (for Medicare Parts B and D, a supplemental
insurance policy, and all out-of-pockets) for a healthy 63-year-old woman
retiring this year (living to age 89) are projected to be $362,607 in future
dollars, or 29.9% more than a 65-year-old male ($279,176).”
The report concludes that health care will undoubtedly be
one of the most significant retirement expenditures for many; however, the annual
savings required to cover this expense may seem more reasonable if individuals consider
investing more aggressively for retirement over longer periods of time. For
example, a Millennial entering the work force has a fairly good chance of
meeting these worrying figures if they invest
regularly in a health savings account (HSA) during the course of their working
lifetime.