How to Help Your Clients Plan for Health Insurance in Retirement

Christine Simone
February 7, 2024

When it comes to retirement planning, your clients have a lot to think about. Estate planning, living expenses, and income sources are just a few of the topics they’ll need to explore while crafting their retirement plans. Lucky for them, you’re there to help answer questions and guide them along the way.

But when financial advisors meet with their clients leading up to this big milestone, there’s one crucial topic that’s often overlooked.

What is this overlooked topic? Healthcare. Yep — as crucial as it is, it doesn’t play a role in many conversations about retirement.

As a comprehensive financial advisor, you know how important health insurance and healthcare costs are to your clients, especially in retirement. That’s why we’re here to help you start the conversation.

Why Don’t Financial Advisors Talk About Health Insurance in Retirement Planning Meetings?

You know how much healthcare eats into your clients’ budgets, especially as they age. You also know that health insurance looks different in retirement, with most people losing their employer-sponsored plans, sometimes before they’re eligible to enroll in Medicare. 

So why does this topic fail to surface in retirement planning meetings? 

First, like finance, healthcare is a very complex industry. It’s difficult to understand a lot of the laws, regulations, and policies around healthcare and health insurance. Even for financial advisors who spend their careers focused on details, health insurance is a complicated topic.

Second, healthcare is personal. It’s not easy to advise on such a personal and complex area of your clients’ lives. Healthcare affects your clients’ ability to live a healthy life, and it’s not something to take lightly. You may feel unsure how to address such a significant topic.

While it’s a tough subject to talk about — much less plan for — healthcare can’t be left out of retirement planning meetings.

Why It’s Important to Discuss Health Insurance in Retirement Planning Meetings

Unfortunately, most of us have experience with high healthcare costs. But we may not realize how expensive healthcare can be in retirement. 

The average 65-year-old couple today will need $300,000 for healthcare costs in retirement. That means about 15% of their total expenses will fall into this category. The numbers speak for themselves—healthcare becomes a big expense in retirement, and the cost of this care is only rising. On top of that, very few clients will come in at that average dollar amount. Some will skew higher, while others will be lower, so it’s important to approach healthcare in a personalized way.

Paying for healthcare is one of the top concerns of retirees. True comprehensive financial planning includes discussing healthcare as part of retirement planning. As a comprehensive financial planner, it’s your job to bring it up. Not addressing this concern proactively is a situation we want to help you avoid. 

So, how can you help your clients plan for healthcare costs in retirement? It’s important to first discuss their health coverage options for when they do reach retirement.

What Health Insurance Options Do Your Clients Have In Early Retirement?

A recent study found that roughly half of the country’s population receives healthcare through their employer. And for retirees-to-be who fall into this category, this insurance disappears when they stop working.

For people who’ve been receiving health insurance from their employer for decades, losing that coverage can be scary, especially when facing growing health concerns in retirement. But losing employer-sponsored health insurance—whether at age 65 or when retiring early—doesn’t mean they can’t find health insurance elsewhere.

Most people can enroll in Medicare at age 65 (although Medicare is also available for younger people with disabilities). While Medicare doesn’t pay for everything, retirees can get additional coverage through private Medigap or Medicare Advantage plans. Medicare plans are individual and don’t cover spouses or dependents.

Not everyone retires at age 65, though. Some people are working hard to be able to retire early. Those who plan to retire before they’re eligible to enroll in Medicare will need health insurance coverage to avoid high healthcare costs before Medicare comes into play. Fortunately, there are several options to bridge the gap; they just need to plan for which option is best suited to their situation.

Spouse’s Health Insurance

While Medicare coverage is for the individual, retirees who aren’t yet 65 years old may still be covered by a working spouse’s employer-sponsored plan. Even if two partners were individually insured while both were working, it’s possible for one person’s policy to cover their retired partner, too. 

Consolidated Omnibus Budget Reconciliation Act (COBRA) Insurance

COBRA health insurance offers continued coverage when an employee retires or loses their job. For retirees, this coverage extends for 18 months. That means that if they have more than 18 months between losing their employer-sponsored health insurance and receiving Medicare coverage, they’ll need to find other coverage. 

This type of insurance can be expensive because the individual pays for the entire cost whereas before, the employer paid a portion of the premium. It may be less expensive, however, than a Marketplace plan.

Marketplace Insurance

Retirees can also shop for health insurance policies on the Health Insurance Marketplace. (Depending on the state they live in, they may have to use a state-specific Marketplace.) The Marketplace offers a range of plans at different costs and coverage levels.

Many individuals who aren’t eligible for workplace health insurance policies, such as small business owners, buy health insurance on the Marketplace, but it makes sense for retirees who lose workplace coverage, too. Retirees may qualify for a Special Enrollment Period outside of the Open Enrollment Period when they lose employer-sponsored healthcare coverage. 

How Your Clients Can Prepare for Healthcare Costs in Early Retirement

While maintaining health insurance coverage when transitioning into retirement is an important means of managing healthcare costs, there are a few other things you can discuss with your clients to help them prepare for retirement.

Don’t Allow Coverage to Lapse

Without a plan to find health insurance between an early retirement and Medicare coverage, retirees can face an overwhelming choice in coverage options—or an overwhelming cost when they fail to make a choice. Make sure your clients have a plan to pay for coverage for the duration of their retirement so they aren’t unprepared for sky-high healthcare costs. 

Use a Health Savings Account (HSA) to Save for Healthcare Costs

As a financial advisor, you know the valuable benefits of an HSA. With a triple tax advantage—as long as the funds are spent on qualified medical expenses—an HSA can be a fantastic savings vehicle for clients who are eligible to contribute to one. 

Consider Long-Term Care Insurance

More than two-thirds of people over age 65 will need long-term care in their lifetime. Long-term care insurance can help fill in the gaps left by Medicare—including costs associated with nursing homes, personal care, and rehabilitation therapy, for example. 

If your clients are in their 50s or 60s and have healthy savings and income, long-term care insurance can give them security in knowing that they’ll have more costs covered without having to deplete their savings. 

How Caribou Can Help

Healthcare is important—especially in retirement. Don’t let your clients fail to plan for healthcare costs and health insurance when planning for their retirement goals. As a comprehensive financial advisor, it’s in your hands to bring this topic to your planning meetings. 

But you don’t have to do it alone. After all, you have a lot on your plate already, and the complexities of the healthcare industry can be overwhelming to sort through. Instead, partner with Caribou to help your clients plan for their healthcare needs in retirement. 

At Caribou, we partner with financial advisors to help them with the complexities of their clients’ healthcare planning. By working with Caribou, you can give your clients peace of mind knowing they’re working toward a secure and healthy future. To see if we can help you with your clients’ healthcare needs in retirement, click here to schedule a conversation today.

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