The retirement plan advisers of today face a dilemma. They
find themselves at the corner of “Full Disclosure Drive” and “Self-Interest
Avenue.” What has blurred the lines between full disclosure and questionable
business practices? Since when has educating the client moved from the
good-business-practice column to the possibly questionable one?
First of all, can full disclosure be used to blur the lines
of self-interest? It most certainly can. Large expenditure items, such as
hedging for 30 years in retirement or longer or the need for long-term care,
must be at the forefront of any financial or retirement conversation. Any
retirement planning or retirement readiness conversation needs to include the
topic of health care. A retirement planning strategy today must incorporate a
full-disclosure discussion around the needs associated with health care in 2014
We have grown up being inculcated to believe that we enjoy
the most advanced medical care available on the planet. Up until now, we have
flourished in a medical treatment “land of plenty,” where all you needed was a
job, medical insurance or cash, for the best health care known to man to be at
We know that the consumption of health care services, and
the corresponding expenses for any treatments, is back-end loaded for the
average American. The overwhelming majority of health care expenses for most
Americans will occur during the last six months of life. Anyone who has
observed the slow death of an aged American—and who has also viewed the
corresponding medical bills—is well aware that six-figure-expense days can
repeatedly occur during the final month of a prolonged hospital stay.
Accepting the above as fact, since it occurs more times than
not, some investment companies have sponsored research that incorporates the
need to fund such expenses within an individual’s retirement savings
Should All Information Be Disclosed?
Does introducing the reality of health care consumption and
the corresponding costs during the final years of one’s life need to be
addressed in a retirement planning conversation? Or should those fees, the
corresponding calculations and the funding of such future expenses be addressed
in a completely different one?
Investment research from Putnam Investments has found that,
under the new health care system, a married couple, at age 65, should
anticipate spending $287,000 on health care during retirement. Since several
studies have arrived at or close to that $287,000 as the anticipated lifetime
estimate of out-of-pocket expenses for a married couple at age 65, that number
has all of the attributes of consistency, if not accuracy.