With health-care costs rising much faster than inflation, planning ahead for health-care expenses has been increasingly material to financial advising. But integrating care expenses into retirement planning is only part of the puzzle.
Ensuring that clients not only have enough in their retirement plan to cover health-care expenses, but also have the most cost-effective strategy for their health coverage, is part of comprehensive financial planning.
In this column, I’ll explain how advisors can help clients save up to $12,000 annually by transitioning to Medicare. This is a situation that we see often for professionals who are partners or business owners in their organization, and nearing retirement age. For this example, we’ll use a client who works as an attorney and firm partner.
I’ll cover why transitioning off the group plan is often the right strategy, what Medicare choices are available, and how asking the right questions can uncover the best, most cost-effective coverage option for your client.
The Situation
As the client approaches Medicare eligibility at age 65, he is also at his peak earning potential as partner in the firm. But partners are generally responsible for paying 100 percent of the costs of their employer-based health insurance. This can be upwards of $1,000 per month, or more if the coverage includes dependents.
Often, partners at law firms or other professional enterprises will stay on the group plan because of inertia. It seems like the path of least resistance, and they have many other priorities to consider. When you are billing in six-minute increments, how much time do you really want to spend evaluating health insurance? There is also a misconception that Medicare covers less, or provides worse coverage than group insurance.
I say this is a misconception because, with very few exceptions, partners at law firms who become Medicare eligible should always transition to Medicare at the first available opportunity.
Making the transition to Medicare can translate to savings of up to $15,000 annually without compromising access to good health care. In fact, in some cases, the network of doctors and hospitals your client has access to will actually expand through Medicare.