We’ve been talking about retirement advisor indicators. You may have an advisor, but is this advisor a retirement advisor? We’ve given a few indicators that can tell you that maybe they aren’t the right advisor for you and that you might need a second opinion.
The reality in our world is that the financial industry does not train you how to be a good retirement advisor because it’s not in their best interest. The financial industry trains advisors to help you grow and accumulate your money. They want you to build a portfolio and essentially buy and hold both in good times and in bad.
The financial industry loves this because when you invest in their products, they collect fees every single year. They want you to hang on forever so they can keep collecting fees. The problem is when you are getting close to retirement or you are in retirement, the game changes. You don’t have the same time that you used to have to make up for losses. You’re not adding to your portfolio as much anymore. Now, maybe you’re taking money out, and different parameters come into play.
Let’s talk about indicator number three. Indicator number one was that your advisor should focus on protecting your assets first and foremost. Indicator number two was that your advisor should be focusing on how much income you have, not how much money you have, and that’s a very important distinction.
Indicator number three is that your advisor should be helping you with your healthcare in retirement.
There are two major components of healthcare in retirement that you should think about. One of the biggest concerns people have going into retirement is how they are going to afford their medical expenses. Healthcare expenses are rising like crazy, and they have been for years with no end in sight. There are two primary healthcare issues you need to think about.
The first issue is ongoing healthcare. Ongoing healthcare has to do with things like going to the doctor, getting your prescriptions, or even hospital visits. Once you hit age 65, the second issue comes into play: Medicare. If you’re still working, Medicare may kick in a little bit later, but typically, once you’re at 65, you’re on Medicare.
You first must sign up for Medicare with all the fun stuff that entails. It’s hard to miss this because about four to six months before your 65th birthday, you’re going to start receiving a bunch of letters in the mail. I had a client come in the other day with a huge stack of mail. This huge stack of mail was all letters he’d gotten trying to sell him Medicare six months prior to his 65th birthday. There’s a part A and a part B to signing up for Medicare and you need to understand how that works.
Part A has to do with your hospital, and part B has to do with your doctor. Then you must make another decision. Should you get a supplement, which is traditional Medicare planning, or should you do advantage, which is the HMO of Medicare planning? Both approaches have their pros and cons. Which is right for you? Is that something you need to have figured out on your own? No. This is what you have an advisor for. An advisor who focuses on retirement planning can help you with that. If they can’t help you with that, you probably need a second opinion. It’s that simple.
If you’re turning 65 and your advisor doesn’t know what to do about your Medicare planning, it’s a red flag. How is your advisor a retirement advisor and too lazy to find out how it works? If they are just focused on what makes them the most money you need to find a better-rounded advisor. If your advisor doesn’t even know how Medicare works, what else might they be missing?
I know it’s not exciting to talk about Medicare, but it’s important because it’s your healthcare. You also must watch out for Medicare premiums. Those are based on how much money you earned two years before every year. If it’s 2022, your Medicare premiums are based on how much your income was in 2020. If it’s 2023, your Medicare premiums are based on how much money you made in 2021, and so on. Does your advisor know that? Does your advisor take that into account when building an income plan for you?
I can’t tell you how many times I’ve seen people be a minimal amount over the limit, like even $100. The next thing you know, boom, they’re put into a higher bracket. That higher bracket costs them more money in additional Medicare premiums than the extra $100. If their advisor was paying attention, they would reduce that income by $100 a year.
Part one of healthcare planning retirement is dealing with Medicare. Part two is knowing what Medicare does not pay for. This isn’t the little stuff like co-pays for supplements. I’m talking about big-dollar things that Medicare does not cover. Our government says that if you hit age 65, and make it to Medicare, you have a 70% chance that you’re going to need long-term care at some point. They are not saying that 70% of you are going to be in a nursing home, but you will need long-term care.
Most long-term care is delivered in the home. This is where you pay nurses or doctors to come to your house and take care of you. It might be home healthcare aides. It’s not free for that and very often Medicare doesn’t cover it. What if it gets worse? My wife likes to say I have selective Alzheimer’s. Let’s say I were to get Alzheimer’s one day. It might start out not so bad, but over time maybe my wife starts to need help. Maybe she starts bringing nurses or doctors or healthcare aides to help keep me at home. It’s going to cost money. If I get worse, it may start to cost too much money.
The most expensive care is 24/7 care at home. If they have to come to you, that’s the most expensive kind of care. You need to have the assets to pay for that if it were to become necessary, but most people don’t have enough.
In my fictional scenario, what happens when it starts getting bad? They might move me to an assisted living facility, but if my Alzheimer’s keeps getting worse over time, eventually, I might end up in a nursing home.
I bet almost all of you know of someone that’s gone through something like that. If you do, you know it can cost a boatload of money. Medicare covers none of those expenses. They might cover the first 100 days or the initial stages, but in the long term, they are not there for you.
How are you going to cover that? Every retirement plan needs to consider how you are going to pay for healthcare. Are you going to pay for it out of your pocket? Are you going to transfer risk to an insurance company? If you transfer risk to an insurance company, are you going to use traditional long-term care insurance? Are you going to use annuities? Are you going to use life insurance options? What’s your plan?
If you have to ask your advisor about these things, you may have the wrong advisor for retirement. They should have already brought it to you. That’s their job, not yours. If you would like a financial advisor that focuses in retirement, give us a call for a second opinion. We try to make it easy and there’s no obligation. Reach out to us to get your Retire Right Report.
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