Data & Research June 24, 2015

Advisers Need to Step Up Senior Benefits Game

Only 36% of advisers provide guidance on Social Security, Senior Market Sales says.
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Many financial planners do not think investors need a strategy when it comes to Social Security and Medicare, according to “The New Foundation of Retirement Planning: Social Security and Medicare,” a new white paper from Senior Market Sales (SMS).

However, multiple surveys have shown that more than half of investors expect their advisers to give “specialized advice on how to maximize Social Security and incorporate health care costs, including long-term care, in their retirement plans,” the report says. Currently, only 36% of advisers offer advice on Social Security and a mere 13% of advisers provide health care advice. “This presents a major opportunity for advisers and firms that do offer this specialized advice to differentiate themselves and gain market share,” SMS says.

An average healthy couple retiring in 2015 will need $366,600 to cover their health care costs in retirement, SMS says. In 10 years, 98% of an average couple’s Social Security benefit will be needed to cover health care costs, and in 20 years, health care costs will exceed the average Social Security payment. It is no wonder that 63% of people over the age of 50 say their top retirement financial worry is health care costs.

Many people think Medicare will cover all their health care costs, but the reality is that it only covers 62%, with private insurance covering 15% and individuals responsible for 13%. With health care expenses continuing to grow and the number of retirees also rising, people are going to be responsible for a greater percentage of the costs, SMS says.

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Social Security currently pays a couple an average of $556,000 in lifetime benefits, SMS says. “If half a million dollars is not enough to convince today’s financial adviser that Social Security deserves a seat at the table, then Social Security’s role in the context of Medicare should,” the insurance marketing firm says. Nearly three in four Americans say Social Security is their top source of expected retirement income for out-of-pocket health care costs, according to Nationwide Financial Retirement Institute.

Advisers should become conversant with the Social Security and Medicare health plan choices people have, SMS says. “Financial advisers must be able to provide highly specialized advice and a range of services—and if the requisite experts aren’t in their own officers, they’ll need to team up with allied professionals,” the white paper says.

Advisers can register with Senior Market Sales to download the white paper here.
Client Service June 24, 2015

Couples Not on the Same Page When it Comes to Finances

The majority of couples believe they communicate effectively when it comes to finances, but a new study shows otherwise.
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While nearly three-quarters (72%) of couples believe they communicate very well with their partner when it comes to finances, 43% could not correctly identify how much their partner makes, according to Fidelity Investments 2015 Couples Retirement Study, and of those, 10% were off the mark by $25,000 or more.

In addition, nearly one in four (38%) disagreed on the amount of their household’s investable assets. When asked how much they would need to maintain their current lifestyle in retirement, 48% said they have no idea, and among the other couples who have given it some thought, 47% are in disagreement about the amount needed. Sixty percent of couples have no idea how much their Social Security benefit might be.

Couples are also very worried about how well they will fare in retirement, with 74% anxious about unexpected health care costs, up from 70% in 2013. Just over half (51%) are concerned about outliving their savings, up from 42% in 2013.

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Despite these concerns, only 21% have developed a retirement plan, and 36% haven’t even thought about doing so, up from 28% in 2013. Thirty-seven percent haven’t considered the impact of potential health care costs on their retirement savings, up from 30% in 2013.

NEXT: A Retirement Plan’s Impact

Those who have taken the time to establish a retirement plan have a much better outlook on their future. Forty-two percent believe they will have a very comfortable retirement, compared with 18% of those without a retirement plan. Sixty-seven percent are confident they could assume full financial responsibility for retirement, if needed, compared with 42% of those without a plan.

“When couples work with an adviser, we see a marked difference between those who have a plan and those who do not,” John Sweeney, executive vice president of retirement and investing strategies at Fidelity, tells PLANADVISER. Advisers need to start their discussions with couples by getting both parties involved and ensuring that they are transparent with one another, he says. Start by asking them about what kind of lifestyle they want for their retirement. “You need to make sure the couple is aligned before you can get into how to pay for that retirement,” he says.

Fidelity has three additional tips for advisers working with couples to ensure that they are more aware of each other’s financial outlook, starting with prompting the couple to ask each other about their next big goals, such as buying a new home, saving for a child’s college education or having enough to retire.

Advisers should also recommend that couples should also set aside money for an emergency fund. Fidelity suggests that the fund be adequate to cover three to six months’ worth of living expenses. Advisers should also ensure that partners should prepare for the unexpected by naming beneficiaries for investment accounts and insurance policies, and discuss estate planning, health care proxies and eldercare arrangements.

“We know couples don’t always agree when it comes to money, but we were surprised how many missed the mark on the question of their partner’s salary,” Sweeney says. “If gaps exist around basic questions like salary, couples might have other opportunities for improvement on the financial front, such as sorting through and tackling important issues together around the next big milestones in their lives, how and where to spend retirement and later-in-life issues involving eldercare and estate planning. By taking the time to engage in conversation and plan, your chances of creating a strong foundation and achieving your goals are greatly enhanced.”

Fidelity’s Couples Retirement Study is based on a survey of 1,051 couples.

Fidelity has developed a Couples Quiz that can help advisers “break the ice” when approaching a couple. One spouse can take the quiz and email the results to their partner to get the conversation started. Advisers can suggest that a couple take the quiz and then come in to their office to discuss a plan, Sweeney says. Advisers can share Fidelity’s Couples Quiz with their clients by going here.

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