Article originally published in Nationwide’s The Current Magazine: Summer 2021 edition.
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 over the past few years 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 that financial professionals should think about. Generation Xers are reaching a point in their lives and careers where retirement planning may 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 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. Older millennials are now on the cusp of 40, and the next generation is entering 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 company 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 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. Vaccines are usually covered, too.
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 coverage now before approaching an age at which they may think of retiring. The cost of long-term care (LTC) will continue to increase, and many of those costs associated with LTC are not covered by Medicare. One important thing to remember is that those who wait too long to purchase LTC coverage may no longer qualify for LTC insurance if chronic health conditions or other ailments have arisen. Knowing when your client’s “sweet spot” is for purchasing long-term care coverage can provide more financial wellness later in life.
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.