Planning for Health Care in Retirement

The critical discussion advisers need to have with participants about health care

Despite knowing they should save for retirement, people keep overlooking an equally important fact—however much or little they save now is going to get spent. One of the factors that can quickly eat away at retirement savings is health care. With estimates in the hundreds of thousands of dollars for health care expenses in retirement alone, the topic can no longer be overlooked.

Alison Cooke Mintzer, editor-in-chief of PLANADVISER spoke with John Carter, president and chief operating officer (COO) of Retirement Plans at Nationwide Financial and Kevin McGarry, director of the Nationwide Institute at Nationwide Financial, about the need for advisers to understand health care costs and how best to help their clients prepare for those costs in retirement.

PA: What are the impact/risk/implications of health care costs on retirement planning?

Carter: America faces a looming retirement crisis. With more than 60 million Baby Boomers reaching retirement by 2030, a lot of planning and education is needed.

Individuals who live to the age of 65 today have a 70% chance of needing some sort of long-term care during their lifetime. And not only are people facing the cost of health care, but they’re also witnessing their parents, relatives or friends needing some sort of long-term care. So they’re beginning to realize the costs associated with that, as well.

According to a Nationwide Financial survey, the majority of advisers (58%) say retirement plan participants want to talk about health care but haven’t necessarily planned for it in retirement, so there’s a big opportunity.

McGarry: Nationwide is committed to helping America prepare for and live in retirement. We know the impact of health care is a significant factor influencing whether that can be achieved, but many retirement plan advisers don’t have the tools and resources they need to address plan sponsors’ and participants’ concerns about the subject.

We learned through our survey that 49% of advisers believe they could be held liable for not preparing clients to meet health care costs in retirement. So, we need to help plan participants understand what health care expenses they could be facing and then assist them in making a plan to help prepare for those costs.

PA: Kevin, have you found that retirement plan advisers who also have expertise in health care planning are becoming more and more in demand?

McGarry: Yes. Advisers who are knowledgeable about health care are actually building trust and credibility among their plan sponsor clients and their individual participants. This is invaluable, not only in retaining clients but also in attracting new ones. Health care is a very relevant conversation, and advisers today need to seek out partners who offer resources and tools that help eliminate the guesswork.