Women are significantly more concerned than men about the rising costs of healthcare in retirement, not surprising given that women, on average, live longer. However, they often face financial disparities throughout their employment, lower lifetime earnings, reduced retirement savings and higher healthcare costs than their male counterparts. While retirement is a phase many people look forward to, it can also bring unforeseen challenges, especially when someone faces significant medical needs for themselves or their partners. When it comes to retired women, who often have unique financial circumstances, it is crucial for financial advisors to be proactive and prepared—engaging these women in proactive discussions about strategies that can protect them from financial ruin and ensure their peace of mind about healthcare spending. These conversations should encompass health conditions and family health histories and address the realities of aging and declining health.

According to a report by the Employee Benefit Research Institute (EBRI), women spend more on healthcare in retirement than men. To ensure they have sufficient money to cover healthcare expenses in retirement, women planning to retire in 2021 should have saved $193,000. Compared with men of the same age, women need nearly $21,000 more when entering retirement. This discrepancy is primarily due to women’s longer life expectancy and their higher likelihood of experiencing chronic health conditions such as arthritis, osteoporosis and dementia. Furthermore, women are more prone to need long-term care, which can be financially devastating without proper planning.

Unfortunately, many consumers lack sufficient knowledge about the challenges of health deterioration and the expenses associated with healthcare, particularly end-of-life care. A 2020 study by the American College of Financial Services surveyed 1,500 individuals aged 50 to 75 to assess their knowledge about finances in retirement. The study found that fewer than one in five female respondents realized that 70% of the population will need long-term care at some point in their lives. The majority underestimated this reality, with approximately one in three female respondents believing that the percentage at risk is 25% or lower. This lack of knowledge likely contributes to the fact that only 8% of female consumers believe it is very likely they will require long-term care in their lifetime.

This presents an opportunity for advisors to educate clients about declining health, as well as additional healthcare costs and the impact of these costs on the client’s overall retirement spending plan. Client-facing professionals play a pivotal role because they provide crucial data on healthcare costs in retirement; they can offer potential strategies to alleviate financial burdens resulting from a client’s declining health; and they can start meaningful discussions with clients about their health circumstances. Longevity and aging discussions can be challenging and multifaceted, with every client facing unique challenges and personal circumstances.

There are important topics to consider in these discussions:

• Clients must acknowledge the realities of health and aging. By discussing medical conditions and family medical histories, advisors can help clients make informed financial and legal decisions to reduce their financial burdens.

• Clients must review their medical plans, including their Medicare coverage. By assessing medical plans and Medicare coverage, clients can ensure that chronic or foreseeable medical conditions are covered, reducing their overall copays, coinsurance and deductibles.

• Advisors must discuss medical directives and durable powers of attorney. Medical directives, such as advance directives or living wills and the durable power of attorney for healthcare, allow individuals to express their wishes about their medical treatment and appoint a trusted person to make healthcare decisions on their behalf if they become unable to communicate or make decisions because of illness, injury or cognitive impairment.

• Clients must update their estate plans: These typically include provisions for the care and support of loved ones after their passing. By reviewing and updating these plans during retirement, clients ensure that the needs of their spouses, children or disabled family members are adequately addressed. Such planning allows individuals to establish strategies for providing financial security for loved ones.

• Clients should maximize health savings account (HSA) contributions. HSAs offer a triple tax benefit: Money is saved tax-free, grows tax-free, and can be used for medical expenses tax-free.

• Clients should explore comprehensive long-term-care insurance options. That means taking the time to consider both traditional and hybrid insurance. Long-term-care services can be financially overwhelming, especially when extended assistance with daily activities becomes necessary. A long-term-care policy can provide financial protection by covering long-term-care services’ costs and helping clients preserve financial assets.

• Clients should consider the benefits of annuities. These vehicles offer an excellent solution to mitigate longevity risk and provide a guaranteed income stream.

Advisors can help clients tackle these challenges by promoting open dialogue about the inevitable aspects of aging. These discussions should include candid talk about the clients’ potential need for assistance with day-to-day activities and long-term care. Moreover, it is imperative to recognize the disproportionate burden women may face when confronted with financial hardships because of an ailing or deceased spouse. By integrating health and healthcare factors into retirement planning, advisors can effectively address the potential challenges that may emerge during their clients’ later stages of life. And a proactive approach will safeguard clients’ financial security and give them and their families peace of mind.  

Kaylee Ranck, Ph.D., is the research director for the American College of Financial Services' Center for Women.