When we're young and feeling good, we often take our health for granted. But almost everyone suffers injuries, disease and, eventually, the effects of old age.
Unfortunately, few of us ever plan for those eventualities. And that failure can have catastrophic results. Contributor Suzanne McGee, in her story, "The Big Question Mark," on page 54, tells us of one family paying $200 a day to cover the out-of-pocket healthcare expense of a 92-year-old man needing around-the-clock attention, and of another family whose patriarch is in a care center costing $400 a day. "He's been there for years," says a relative, "and won't be coming out."
Healthcare isn't cheap. And costs are increasing rapidly. Annual healthcare spending in this country, which was $2.5 trillion in 2009, is projected to surpass the $4.2 trillion mark in 2018, according to a 2010 report by Aetna, which based its numbers on statistics from the Centers for Medicare and Medicaid Services. And, as McGee notes, Americans-particularly older Americans-will be consuming more healthcare products and services even as the organizations that have funded or offset those expenses are looking to shift the burden back to the individual.
Yet, despite seeing what's happened to an older generation and the chance that healthcare programs may be cut, two-thirds of people 50- to 64-years-old lack confidence that they're saving enough to handle their healthcare costs in retirement, according to a survey by the Society of Actuaries (SOA). Only 7% of respondents felt sure that they'd have enough money after they stop working to cover their substantial healthcare needs. The SOA noted that a couple in their mid-sixties could incur some $250,000 in healthcare costs after leaving the workforce.
How are people going to deal with this? According to the SOA, one of the most common answers is to "try to stay healthy to minimize expenses." Not exactly the best plan.
An important discussion financial advisors need to have with clients is on healthcare costs in retirement. This may take many advisors out of their comfort zone, McGee notes, since healthcare is complex and most advisors would rather focus on financial plans, portfolio management or another subject area in which they're expert.
In this issue, we provide some guidance for investment professionals on how best to broach the topic of healthcare with their clients, exploring how advisors can discuss healthcare planning and the basics that any consultation should cover. We also examine three of the most pressing healthcare issues clients are dealing with right now-long-term care, Medicare and health savings accounts.
Still, it's a difficult issue. McGee talked with Ron Courser, a financial planner in Grand Rapids, Mich., who admits it's almost impossible to devise a perfect solution to healthcare planning given that there are so many unknowns, particularly with healthcare reforms. But, as with other areas of financial planning, advisors offer value precisely because these issues are so complex-and the need for education so great.
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