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 Rising healthcare expenses can eat away at retirement savings.
Future total healthcare costs for a 65-year-old couple retiring this
year will average $394,000 in today's dollars, according to a report
this week by HealthView services, a retirement healthcare data
company in Danvers, Massachusetts.
But a couple that retires in 2025 at age 65 will need $464,000 to
fund those same expenses, which include various Medicare premiums,
copays and dental visits. The bills only rise as couples live beyond
average life expectancies, according to HealthView.
Financial advisory firms are beefing up their software to tailor
projections of clients' retirement healthcare costs. The figures can
drive home reality, especially as the tools become more
sophisticated, advisers say.
The jolt is much-needed. Many Americans age 50 or more do not
include healthcare costs in their retirement planning, even though
the price tag is their greatest concern, according to a 2014 Merrill
Lynch survey.
Raymond James added a new healthcare calculator to its financial
planning software last year in collaboration with the MIT AgeLab, a
Massachusetts Institute of Technology (MIT) research program that
encourages the development of new technologies to support human
longevity.
The calculator helps stimulate retirement planning discussions at
Briggs Wealth Management in Clearwater, Florida, a Raymond
James-affiliated firm. Advisers Kimberly and Dennis Briggs use it to
estimate everything from future Medicare premiums to long-term care
insurance premiums, she said.
The tool, part of a broader financial planning analysis, relies on
clients’ answers to questions about family histories, chronic
illnesses, and other factors.
Clients then review several future healthcare scenarios, which can
be one based on their current strategy, and two others with and
without long-term care insurance. The analysis, for example, showed
one couple whose families had a history of medical problems that
buying long-term care insurance could boost the probability of
reaching their retirement goals from 40 percent to 76 percent.
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Achieving those goals can depend on curbing current expenses to save
more, Kimberly Briggs said. Putting a number on future healthcare
expenses can motivate clients to scale back vacations or buy a
smaller house, she said.
Merrill Lynch launched financial planning software last year that
uses interactive graphics and charts to help clients understand
future healthcare costs. Clients remember information more easily
that way than after a long conversation, said Susan Acker, a Merrill
Lynch adviser in Rochester New York. They interact with the program
on Acker’s iPad by tapping on icons to see research and charts about
their future costs.
Small firms are finding healthcare-focused tools in off-the-shelf
programs such as MoneyGuidePro, a financial planning program by
PIEtech Inc in Powhatan, Virginia.
The results of the process may surprise clients. Healthy retirees,
for example, typically spend more on healthcare than those with
medical problems, such as diabetes, according to HealthView, the
data provider. That is because good health often means living
longer.
(Reporting by Dan Butcher; Editing by Suzanne Barlyn and Cynthia
Osterman)
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