Health Care Costs in Retirement – Why a Holistic Approach Matters

Securing a comfortable retirement has long been a cherished goal for Americans. As 2024 sets a new record for retirement in the U.S., with an average of 11,000 Americans turning 65 every day, retirement is becoming a reality for many. However, as life expectancies rise and health care costs soar for Americans, addressing health care costs in retirement has become a pressing concern for both clients and their advisors. Achieving a blissful retirement could be derailed without a comprehensive plan and the necessary tools to effectively plan for and manage health care costs and needs during retirement.

The Impact of Rising Health Care Costs

Many mistakenly assume that Medicare will cover all their health care expenses during retirement. While Medicare does cover some medical costs, it does not cover everything, leaving retirees responsible for Medicare premiums and various out-of-pocket expenses. These premiums are likely to increase over time, alongside the continuous surge in health care costs. The escalating costs of prescription drugs and medical treatments further burden retirees financially. Failing to account for the disparity between health care costs at the onset and conclusion of retirement can significantly impact overall retirement security if not carefully anticipated and planned for.

The Complexities Around Health Care Planning

Health care planning is important for all ages, whether for someone in a household or for those looking to invest in tax-optimized ways for future health care expenses. As retirement planning becomes increasingly intertwined with health care considerations, individuals are seeking guidance from financial advisors to navigate this intricate landscape. However, addressing health care needs in retirement presents challenges for both investors and advisors due to its complexity.

Calculating health care costs involves numerous variables, such as the client's health status, inflation and rising health care costs, all of which are subject to change. Determining funding against these constantly changing factors is often manual and time-consuming. Portfolio management tools typically don't factor in existing and anticipated health care expenses. Conventional decumulation strategies like "The 4% Rule" do not adequately account for health care cost inflation. Many existing solutions are disjointed and lack the personalized insights investors require.

A Single-Solution Approach

Given the complexity of these factors, adopting a holistic approach that integrates comprehensive tools for planning and management is essential to effectively meet health care needs and ensure long-term financial security in retirement.

Introducing SS&C HealthHub, your comprehensive tool for health care planning. HealthHub puts everything you need at your fingertips, offering an integrated, personalized solution that covers all facets of health care planning. This includes addressing pre-existing health conditions, long-term care expenses, Medicare premiums and geographic considerations. Utilizing an AI-driven personalization engine, HealthHub tailors recommendations based on age and individual interests. By replacing inefficient, manual and disconnected tools traditionally used in the industry, HealthHub meets the intricate demands of both advisors and clients seamlessly.

HealthHub helps advisors and investors by:

• Empowering investors and advisors to make informed health care decisions by addressing complex topics
• Enabling investors to plan with confidence for their future health care needs
• Meeting the demands of both advisors and investors with a streamlined, efficient solution

Addressing health care needs in retirement often presents challenges for advisors and investors alike when it comes to planning, investment and decumulation. Health Hub provides reliable health care cost projection that empowers clients to make informed decisions today for peace of mind tomorrow. To learn more about SS&C's HealthHub solution, download our brochure.