Two Critical Retirement Issues Your Financial Advisor Probably Won’t Help You With — And Why

Asking a financial advisor about Social Security claiming strategies — or healthcare costs during retirement — and you’re likely to see a furrowed brow, followed by some snappy verbal tap dancing. And yet both matters are of primary concern for those planning for life after work.

Ron Mastrogiovanni Sr., president and CEO of HealthView services in Danvers, Massachusetts, says he “grew up” in the financial services industry and knows why advisors have traditionally dodged such questions.

“No one ever trained us on Social Security and healthcare, years ago,” Mastrogiovanni tells the Money Cynic. “Today, that’s beginning to change pretty radically.”

A 2014 survey by Practical Perspectives and GDC Research found that just 36% of financial advisors advised clients on specific Social Security claiming strategies, while a meager 13% offered recommendations on how to manage health care costs in retirement.

And yet, advisors often use Social Security as a marketing device to lure prospective clients to seminars, workshops and free consultations. Jared Weiss with the Corporation for Social Security Claiming Strategies (CSSCS) says it’s “frightening” how many financial advisors talk about Social Security while the percentage who really know anything about it “is very low.” He says pitches such as “The Seven Simple Secrets of Social Security” are common.

“I’m here to tell you that with 2,728 filing rules and what some would say [are] several hundred filing options, there’s a lot more than “Seven Simple Secrets,” Weiss tells the Money Cynic. “It’s much more complex when you start talking about spousal benefits, federal and state worker benefits, Medicare, disability, adult dependent children — there’s a whole array of complexities.”

CSSCS, founded in Plainville, Massachusetts by Cheryl Robertson, a former labor and employment attorney and insurance agent, trains advisors, CPAs and attorneys in Social Security claiming strategies.

“Consumers — investors — are basically demanding that advisors provide them with this information,” Mastrogiovanni adds. HealthView provides advisors with applications and education regarding healthcare planning, Medicare, long-term care and Social Security. “Take Social Security for instance. You optimize Social Security; you’re talking about a difference of hundreds of thousands of dollars in potential income. You’re talking a lot of dollars.”

Weiss says financial planners are finally beginning to integrate Social Security and retirement healthcare expenses into their projections. He estimates that such reports can cost clients anywhere from $100 to $700.

Excluding health care costs from retirement income planning can be an equally expensive error, Mastrogiovanni says. Many advisors recommend a replacement income formula, such as aiming for an income stream equal to 75-80% of your pre-retirement salary. Mastrogiovanni says such a strategy may cover a portion of healthcare costs in retirement but is likely to fall well short.

While healthcare costs vary by age, gender, health, income and state of residence, a recent white paper issued by HealthView projected average lifetime retirement health care premium costs for a 65-year-old healthy couple retiring this year would total $266,589. That sum considers coverage by Medicare Parts B, D, and a supplemental insurance policy.

If total health care costs were factored in — including dental, vision, co-pays, and all out-of-pocket expenses — the couple’s costs would increase to $394,954, the report said. For a 55-year-old couple retiring in 10 years, total lifetime healthcare costs were estimated to be $463,849. HealthView projects that for a couple retiring this year, total healthcare costs would consume about two-thirds of their lifetime Social Security benefits.

However, finding an advisor that not only talks a good game but is proficient in Social Security strategies or retirement healthcare costs is not an easy task. Weiss says his firm offers a “Certified in Social Security Claiming Strategies” (CSSCS) designation to help consumers identify practitioners.

The National Social Security Association, another for-profit firm offering similar education services, also sponsors a Social Security focused designation, the National Social Security Advisor (NSSA).

Both credentials are recognized by FINRA, the self-regulatory agency of the U.S. securities industry though that does not constitute an endorsement by the regulator. Other designations may also integrate Social Security claiming strategies into their curriculum but aren’t specifically certifying Social Security expertise.

Asking your advisor straight out if they have the resources and knowledge to offer advice on healthcare costs in retirement and Social Security is the most direct route to finding competent guidance, both consultants say.

If the advisor answers no, Mastrogiovanni says that’s when a consumer has some tough decisions to make regarding that advisor’s future role in their retirement planning.

Originally published on TheStreet