By George Schein, Nationwide.
- Rising health care and medication costs can be a concern for clients, so encouraging them to take advantage of any employer-provided wellness programs can be a cost-effective way to maintain a healthy lifestyle that can continue into retirement.
- Like physical wellness, financial wellness is also critically important. A health savings account (HSA) is a great way to earmark savings that addresses both of those components of overall wellness.
- Clients should consider investing in long-term care (LTC) coverage now before getting too close to their retirement age, because those who wait too long to purchase it may no longer qualify if chronic health conditions or other ailments arise in the meantime.
Today’s financial professionals may very well spend the bulk of their time working with members of the baby boomer generation. This makes a lot of sense considering the widely reported statistic that every day more than 10,000 boomers hit the traditional retirement age of 65 and will continue to do so for the remainder of this decade.
Yet baby boomers are not the only demographic cohort on which financial professionals should focus. Generation Xers have reached a point in their lives and careers where retirement planning should also be rising on their priority list. For many in this generation, they are now making more money than at any other point in their career and are beginning to strategically plan for their financial futures with retirement in the not-so-distant future.
Millennials, long a catch-all term for the youngest members of the workforce, are a growing part of a financial professional’s book of business. The oldest of the millennial cohort are already reaching age 40, and an even younger “Generation Z” has also entered the workforce.
Although the current financial concerns of members of these various generational cohorts may be very different, there is one concern that they all share: paying for the cost of current and future health care needs. One way to address these concerns is by focusing on the following two specific aspects of wellness.
As the old saying goes, “An ounce of prevention is worth a pound of cure.” For those clients concerned about rising health care and medication costs, encouraging them to take advantage of employer-provided wellness programs can be a cost-effective way to maintain a healthy lifestyle that can continue into retirement. Examples can include a smoking cessation program or meetings with a dietitian paid for by one’s employer-provided health insurance.
An important benefit guaranteed under the Affordable Care Act (ACA) requires health plans to cover many recommended preventive care services at no cost. This means that the service provider will not charge a co-payment or co-insurance, even if an individual has not met their yearly deductible. These preventive care services include regular screenings for issues such as cholesterol, blood pressure, depression, and certain cancers. Many vaccines are covered as well.
Many people are not aware of — or simply choose not to take advantage of — these free preventive care services from their health plans. Identifying and treating minor issues and ailments early saves people from more costly and physically intrusive treatments later in life. That is why taking the time to understand health insurance coverage and accessing all available free preventive services and screenings is so important. The longer your clients stay healthy, the less they will spend on medical care now and in retirement.
The word “wellness” is often associated with physical health, but financial wellness is just as critical. Financial professionals should still have those important conversations regarding debt management and diversification, but another important piece of advice that clients need to hear today is to earmark savings specifically for the costs of health care in retirement. There is no better way to do that than with a health savings account, generally known as an HSA.
These accounts provide funds specifically set aside for “qualified medical expenses.” In some cases, transportation and other costs can also qualify as a medical expense. Money saved and invested in an HSA is subject to a triple tax benefit, meaning that money contributed (up to the annual limit) is not subject to current federal (and most state) income tax. If invested, this money is allowed to grow tax free, and as long as it is distributed to pay for or reimburse a qualified medical expense, the distribution will also be tax free.
Clients should also consider investing in long-term care (LTC) coverage now before getting too close to their retirement age, because those who wait too long to purchase it may no longer qualify if chronic health conditions or other ailments arise in the meantime. In addition, even without possible health conditions that commonly appear as people age, the cost of LTC generally rises as people age. Equally important to understand is that most of the costs associated with LTC are not covered by Medicare. Therefore, encouraging your client to purchase long-term care coverage before it is too late, helps create a more solid footing for financial wellness throughout their remaining retirement years.
The choices a client makes today concerning their physical and financial wellness will be reflected in their retirement tomorrow. Although these decisions are rarely easy, those clients that enter retirement in good financial and physical health will be in a better position to enjoy their golden years. That is why financial professionals should not shy away from integrating the topic of health care and physical wellness into their financial planning discussions.
Originally published by Nationwide on 8 November, 2022.
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This material is not a recommendation to buy, sell, hold, or rollover any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should work with their financial professional to discuss their specific situation.
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