Retirees Tend to Blank on Medicare Details Is Medicare the next frontier to be crossed by financial advisors? According to a government study, nearly half of all Americans close to-or at-retirement age are terrified of what health care costs could do to their retirement portfolios.
Of those admitting to their terror, half said they never discussed their retirement health care costs with their financial advisor.
Why not? Because they're not certain if their advisor knows anything about it.
The next evolution for advisors is to become fluent in talking to their clients about the Social Insurance-Social Security and Medicare-that forms the foundation of retirement.
Advisors who can educate clients on these critical programs will differentiate themselves from their competitors, retain more clients, get more referrals and gather more assets.
It's a powerful tool.
"As if a financial advisors job wasn't hard enough, now their customers want them to add one more layer of expertise to their practice-Medicare advisor," said Medicare expert David Allen of the American Association of Retired Persons.
"As many advisors are finding out, health care costs are the number one concern in retirement, outliving their assets ranks a close second.
" But clouds of confusion can be thrown up when a retiree's mailbox is constantly being flooded with health plan options.
Financial firms must go beyond just the funding issues involved and delve deeper.
For example, it is not unusual for one spouse to retire with excellent benefits from either a private employer or the military, while the other spouse needs to piece together (sometimes inadequate) coverage.
Some pre-retirees may also be worried about restricted access to their doctors once they retire.
Given that some doctors don't accept Medicare's notoriously low reimbursement rate, this is a legitimate concern.
"My wife and I are fast approaching the magic 65.
Our current health insurance situation is a train wreck, so I've been working hard to acquaint myself with Medicare, including reading every page of 'Medicare and You in 2012'," says Brian McConnell, who attended a recent retirement educational event.
"This is worse than dealing with the IRS.
I'm surprised there is not a huge industry of certified Medicare advisors, like tax accountants or financial advisors.
" Financial advisors can position retirement portfolios to finance healthcare by having a type of "sinking fund" to be used to pay for things like deductibles and dental-things not covered by Medicare.
Retirees will also want to keep that fund fairly liquid in case of an unexpected medical expense.
Figuring out ways to help retirees deal with healthcare is more than just an academic issue for financial advisors.
Remember, too, that while enrollment in Medicare is automatic if you've already filed for Social Security (SS).
Medicare enrollment is in your hands if you're still working and not receiving SS.
"Most advisors recommend getting a $1,000 emergency health care fund to pay off any health care bills you might run up," says Paul Fronstin of the Economic Benefits Research Institute (EBRI) "You need these particular sinking funds otherwise you wind up creating more debt trying to pay for the bill you ran up last time.
" To get sound advice and direction on this subject, you need to find the Rosetta Stone of Medicare's unfamiliar terms and arcane rules.
Such financial advisors do exist.
Just as people need to understand their investment portfolios from time to time, they should also review their Medicare options with their financial advisors.
Medicare covers half of a retiree's health care, so when a retiree's health changes they need to have viable options for the Medicare plans that most closely meet their needs.