Will health issues force your clients to retire earlier or spend their nest eggs quicker than they planned?Four in 10 Americans retire sooner than they expected. Of those, 40 percent do so because of health issues or disability, according to the Employee Benefits Research Institute.

According to Fidelity Investments, a couple, both age 65, retiring today will spend approximately $200,000 on health care during their retirement years — and that doesn’t include any assisted living or nursing care.

As employers continue to curb pension plans and health care coverage for retirees, individuals will shoulder a heavier financial burden for medical services.

Thanks to significant medical advances, many conditions once considered life-threatening can be treated, but may result in some level of permanent disability. A disability can increase health care expenses in retirement beyond what your clients had planned for, as well as preventing them from earning additional income to cover those expenses. Social Security may provide some disability benefits, but disability insurance, often considered a tool for the earning years, may have a place in your clients’ retirement risk management plans.

If a client has already been diagnosed with a chronic condition — such as diabetes, heart disease, high blood pressure or osteoporosis — or suffered a disability, adjustments to their retirement savings and distribution estimates may be needed. If they are already retired, they will need to check their budget and income structure to ensure that they have enough available funds for related costs.

WHO WILL COVER THEM?

Your clients shouldn’t count on their employer to continue health care coverage for them after they retire.

Only 30 percent of workers — most of whom are in government positions — still get health insurance benefits in retirement. Among private-sector employees, only 13 percent have access to employer-sponsored health insurance in their retirement. Some employers will allow retirees to stay on their health care insurance as long as the retiree pays the full insurance premium.

Most early retirees will need to secure private insurance to bridge the gap between employer plans and Medicare, which doesn’t start until they’re 65.

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows them to keep group coverage for 18 months, but they will pay the full premium. When their time’s up, if they’re not yet 65, they’ll need to find private coverage.

Regardless of their health, it’s important to maintain continuous coverage.

A lapse in coverage could make them uninsurable if they have a health crisis between policies. When they end coverage with one insurer, they must be sure to get a certificate of insurance to document that they had been insured before. Having that document can make it easier to get coverage, particularly if they have a condition that existed while they were still insured.

If they’re still working, they may want to consider funding a health savings account. Anyone younger than 65 can open an HSA after purchasing a qualified high-deductible health insurance plan.

Unlike the flexible spending accounts some employers offer with group insurance, HSA contributions and gains can be rolled over from year to year — there’s no “use it or lose it” requirement — and they retain ownership of the funds even if they terminate employment. Because of the age limit, they should look at an HSA option far in advance of retirement.

Taking care of themselves can make a big difference both in prolonging working years until they choose to retire, and in keeping health care costs at bay during retirement years.

It’s never too late to start taking care of mind and body by eating right, exercising and getting regular check-ups.

As a bonus, they’ll get more enjoyment out of their retirement years!

J. Graydon Coghlan, is president and CEO of Coghlan Financial Group Inc. Reach him at (800) 884-5121 or jgcoghlan@cfgretire.com.

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