Financial Planners and Medicare ... Yes, That's Part of Your Job Now Too

  • Originally published May 29, 2012 , last updated December 31, 2015
  • Medicare, Social Security
Financial Planners and Medicare ... Yes, That's Part of Your Job Now Too

As if a financial planner’s job wasn’t difficult enough, your customers now want you to add one more responsibility, one more layer of expertise, to your practice: Medicare advisor. As you’ve probably heard, reported health care costs are now the no. 1 concern in retirement; outliving assets is no. 2.

Essentially, there are three reasons your clients want to talk to you, their trusted advisor, about their health care:

1.  They Don’t Know Anything About Medicare In a survey by Senior Market Sales, more than half (52.1%) of 60- to 66-year-olds rated their knowledge of Medicare and Medicare insurance products as low. They don’t understand what it covers, when they’re supposed to enroll, what they’re supposed to enroll in or what it costs. In a survey by Nationwide Financial, respondents guessed that Medicare would pay for 68% of their health care cost during retirement. Actually, Medicare only covers about 51% of health care costs. Respondents also estimated their per-person cost to be about $5,600 per year, when actually it is about double that amount. Your clients need this information if they’re going to make informed decisions and sound plans for their retirement.

2.  They’re “Terrified” — Yes, that is a strong word, but the Nationwide Financial survey revealed that nearly half of high-net-worth Americans who are close to retirement say they are “terrified” of what health care costs may do to their retirement plans. Yet 38% say they have not discussed retirement health care costs with a financial professional. According to an annual projection released by Fidelity Investments, a newly retired couple will need an estimated $240,000 to cover health care expenses throughout their retirement. This is a 4% increase from those who retired a year ago, which was estimated at $230,000. No wonder they’re terrified. If medical costs continue to rise faster than personal incomes, many retirees will have to adjust their household budgets so they can cover medical costs.

3.  You’re their Trusted Advisor — People want to work with somebody they already know and trust. They don’t want to start all over again. They also want value, and value doesn’t always have to come in the form of a higher return on their investments. It could be just helping them save a little on health care costs. The Nationwide Survey showed that retirees who have discussed retirement health care costs with an advisor had a better handle on costs. Half of the respondents said they would be more likely to stick with their current advisor if they could discuss how Medicare and overall health care costs could affect their retirement plan.

These statistics mirror the findings of Senior Market Sales’ Social Security survey, which showed that 56% of clients said they would look for a new financial planner if their current one couldn’t offer advice on Social Security election strategies. What all of this research shows is that the formerly separate roads of financial planning, Medicare and Social Security are no longer running along parallel-but-separate paths. They’re not even intersecting — they’re merging to become one. Clients and advisors alike are beginning to recognize the pitfalls of planning for these things separately: money left on the table, potential risks left unaccounted for, bad timing and bad decisions.

The next evolution for advisors is to become fluent in talking to clients about the social insurance — Social Security and Medicare — that forms the foundation of their retirement. The advisors who can educate their clients on these critical programs will differentiate themselves from their competitors, retain more clients, get more referrals and gather more assets.

To learn more about what your clients expect from you, download our research summary report: Social Security Planning: A Cornerstone of Your Financial Practice.