planning for health care expenses in retirement carolyn mcclanahan m.d., cfp® life planning...

Planning for Health Care Expenses in Retirement

Carolyn McClanahan M.D., CFP®

Life Planning Partners, Inc.

Twitter @CarolynMcC

Introduction

• Why talk about health?

• Components of a health care discussion

• Implement the health care plan

Why talk about health?

The Great Unknown

• Health status

• Where are you going to get ill?

• Health costs

• Health costs have grown astronomically although finally slowing

• Many groups provide “average” savings needed What client is truly average?

Savings Needed for Medigap Premiums, Part B Premiums, Part D Premiums, and Out-of-Pocket Drug Expenses for

Retirement at Age 65 in 2014 (EBRI Data)

Discussion = Better Preparation

• Creates “muscle memory” on health care decisions

• More conversations = more family understanding choices

• Family understanding choices = better planning for healthcare costs

Behavior Change

• Share insurance rates of healthier lifestyle

• Life insurance

• Disability insurance

• Health insurance (smoking)

• Insurability - obtain early with obviously unhealthy lifestyles

Impact on Planning

• Longevity Analysis

• Plan differently for the obviously unhealthy lifestyle

• May be okay to use shorter time frames for longevityLivingto100.com

Components of the Health Care Discussion

Components

• Health history

• Health care mindset

• Advance directive planning

Health History

How to get Health History

• Intake forms

• Not fun

• May seem out of place

• Ask

• Better

• More personal

• Can explain why during conversation

So how do you ask about health?

How to Ask

• Start with an open-ended question

• Fill in the details

How to AskPart of financial planning is to make certain you aren’t going to outlive your money. We can’t predict exactly how long you are going to live, so we do an educated guess based on a number of factors. A significant factor is lifestyle.

Tell me what you do to take care of your health.

Health HistoryBasic Health History

• Height, weight

• BMI

• http://www.nhlbi.nih.gov/guidelines/obesity/BMI/bmicalc.htm

• Tobacco status

• Exercise

• Alcohol/drug use

• Medical problems

• Family history

Fill in the Details

• Have you seen a doctor in the last two years?

• Have you ever spent the night in the hospital?

• What medications have you ever had to take regularly other than antibiotics?

Medical Records

• Good to obtain if any question about insurability

• Patient has full rights to their record

• Have them review with a medical professional to make certain they are correct

Keys to Comfort

• Stress that confidentiality is key

• Ask from a place of openness and empathy

• “This is a tough subject for a lot of people”

• Let go of judgment

• “We are all human and things happen”

• Learn to place yourself in other’s shoes

Health Care Mindset

Spending Mindset

• Approach to health care?

• Minimizer vs. Maximizer

• Technophiles

• Holistic care seekers

• Great book!

• “Your Medical Mind” – Groopman and Hartzband

Support Mindset

• Support Systems

• Living arrangements

• Family agreements

Genworth Cost of Care

• https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html

Resiliency Mindset

• How long does the client plan to maintain their “human capital?”

• Tiered retirement

• Healthy clients should keep working

• The fallacy of saving for traditional retirement - http://www.forbes.com/sites/carolynmcclanahan/

Advance Directive Planning

Medical Decision Making• Discuss Medical Decision Making Process

• Many clients haven’t thought about how they make medical decisions

• Examples If you have cancer with a 90% chance of dying

• Would you go to the end of the world for the 10% chance?

• Would you call hospice?

• Warn clients that it is common for people to change their mind when the event actually happens

Advance Directive Planning

• Does client have clear advance directives?

• Have directives been shared with family members and health care professionals

Implement The Health Care Plan

Retirement Income Planning

Retirement Income PlanningMy #1 Dream For Financial Planning

We should plan for two things:

THE DAY WE CAN’T WORK

THE DAY WE WANT TO DO SOMETHING DIFFERENT

“RETIREMENT PLANNING” should go away

Since It Hasn’t Happened Yet• How can you plan for health care costs in

retirement?

• Determine “regular” expenditures (traditional financial planning)

• Determine potential health care expendituresIncorporate health status and health usage mindset

Use EBRI numbers for health care expenses

Add in short or long term long term care costs

Retirement Income Planning

Health Costs Analysis

• High health care user/unhealthy lifestyle

• Use lower longevity and higher health care expenses

• $156,000 men/$176,000 women (90th percentile EBRI)

• Add shorter term long term care costs – 2 years

• Low health care user/unhealthy

lifestyle

• Use lower longevity and median health

care expenses

• $64,000 men/$83,000 women (50th

percentile EBRI)

• Add shorter term long term care costs – 2

years

Retirement Income Planning

Health Costs Analysis

• High health care user/healthy lifestyle

• Use higher longevity and higher health care expenses

• $156,000 men/$176,000 women (90th percentile EBRI)

• Add longer term long term care costs – 5 years

• Low health care user/healthy lifestyle

• Use higher longevity and low health care

expenses

• $16,000 men/$21,000 women (10th percentile

EBRI) or average Medicare B, D, and Medigap

premiums $45,000

• Add longer term long term care costs – 5 years

Insurance

Life Insurance

• Life Insurance

• If unhealthy lifestyle, and still insurableMake early purchase of maximum coverage needed

Share with client coverage costs if lifestyle improves

Create a task to revisit coverage and lifestyle periodically

Life Insurance

Life Insurance

• Life Insurance

• If unhealthy lifestyle, and uninsurableSee what it takes to make the client insurable if possible

Look for other avenues of coverage

• Group through work or associations

Stress need to save, control spending, and minimize debt if family depends on uninsured client’s income

Disability Insurance

• Disability

• If unhealthy lifestyle, and still insurableMake early purchase of maximum coverage needed

Costs improve some, not much, with improvement in lifestyle

Disability Insurance

Disability Insurance

• Disability

• If unhealthy lifestyle, and uninsurableLook at other avenues to obtain coverage

Group insurance

Permanent life insurance with disability rider

• Stress need to save, control spending, and minimize debt if family depends on uninsured client’s income

Long Term Care Insurance• Long Term Care

• Tough one right nowTraditional coverage

Hybrid policies

• People with unhealthy lifestyles could consider shorter term policies if they have well planned advance directives

• People with healthy lifestyles have higher risks of needing long term care over a longer period

Advance Directive Planning

Advance Directive Planning

• In addition to typical “living will”

• Document quality of life measuresCommunication – expressing and understanding

Feeding

• Am I hungry?

• Can I get food to my mouth?

• Can I swallow?

• Grooming

• Interaction

Advance Directive Planning

• In addition to typical “living will”

• Share wishes with health care surrogate and anyone else who can challenge directives

• Discuss wishes regularly

Action Items

• What do you do to take care of your health?

• Livingto100.com

• Understand healthcare mindset

• Insurance

• Life – show the rates

• Disability – get maximum amount early

• Create a long term care plan

• Retirement planning – refine longevity

• Advance directives – clarify quality of life requisites

Questions?

Carolyn McClanahan M.D., CFP®

Life Planning Partners, Inc.

Twitter- @Carolynmcc

Carolyn.mcclanahan@gmail.com