How to Help Your Clients Plan for Health Insurance in Retirement

When it comes to retirement planning, your clients have a lot to consider. Tax planning, income management, and healthcare planning are just a few of the topics they’ll need to explore while collaborating with you, their financial advisor, to craft their retirement plans. Health insurance is a complex subject, and isn’t an area that most advisors are experts in. Which is why we’ve created this blog to help you answer the healthcare planning component of the retirement planning equation. Let’s dive in!

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

‍The average 65-year-old couple today will need $330,000 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.

Aside from costs, clients of financial advisors expect their advisors to help them plan for healthcare costs in retirement. One study found that 65% of clients expected insurance advice from their advisor, and an Accenture study revealed that 40% of respondents reported they were looking for insurance advice as a product/service beyond core investment management. 

Clients want to feel secure about their retirement goals and the healthcare decisions they make that impact their lives in retirement. Clients are looking to you, the financial advisor, to make sure their financial plan creates a smooth, efficient road to retirement. That means including healthcare costs in their financial plan not only to create a more accurate plan but also to dispel the confusion and worry they have about healthcare costs and coverage.

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

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

In 2023, 60.4% of Americans under 65 received healthcare coverage through their employer. For retirees-to-be who fall into this category, this insurance disappears when they stop working.

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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.

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

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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; you and your client just need to plan for which option is best suited for their situation.

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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 typically lasts a maximum of 18 months. However, there are some situations where COBRA coverage can last up to 36 months. For most early retirees though, the maximum length of time for COBRA is 18 months, which 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.

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Marketplace Insurance

Retirees can also shop for health insurance policies on the Health Insurance Marketplace, also known as Affordable Care Act coverage. (Depending on the state your client lives in, they may have to use a state-specific Marketplace.) The Marketplace offers a range of plans at different costs and coverage levels, and can even cover spouses and dependents. Retirees may qualify for a Special Enrollment Period outside of the Open Enrollment Period when they lose employer-sponsored healthcare coverage. 

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How Your Clients Can Prepare for Healthcare Costs in Early Retirement

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

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Don’t Allow Coverage to Lapse

Without a plan to find health insurance between an early retirement date and Medicare enrollment eligibility, 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 for healthcare coverage for retirement before they reach their target retirement date.‍

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. 

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How Move Health Can Help

Healthcare planning is a critical component of comprehensive financial planning, but you don’t have to do it on your own. You have a lot on your plate already, and the complexities of the healthcare industry can be overwhelming to sort through. Instead, you can partner with Move Health to help your clients plan for their healthcare needs. 

At Move Health, we partner with financial advisors all over the country to equip them with the healthcare planning capabilities they need to incorporate clients’ health insurance and medical costs into their comprehensive financial plan. When advisors partner with Move Health, they gain access to our award-winning software and an expert team to provide insights and planning opportunities based on clients’ unique circumstances. From initial analysis to enrollment, our tech-enabled, human-driven approach to healthcare planning ensures you and your client have clarity and confidence at every step of the process.

If you’re interested in exploring healthcare planning as a valuable component of comprehensive financial planning, click here to book a call with our team.