Every day at least 10,000 Americans from the Baby Boomer generation are turning 65 and beginning their transition from employed life to retirement. Because of this rapid transition for so many individuals for both clients and brokers, there has become an ever widening training gap in the senior insurance market.
To help close this gap in knowledge and training, authors Justin Bilyj and Glen Shelton recently released their book, “
Employee Benefit Adviser spoke with both authors to learn how retirement advisers and benefit advisers can improve their practice and their clients by adding products like final expense and Medicare supplements. What follows is an edited transcript of the conversation.
EBA: What are the gaps where employee group benefit advisers leave off when employees retire, where individual agents can help?
Glen Shelton: Most people don’t necessarily enjoy change, and when you’re talking about moving off the safety of a group plan and facing all these options with different carriers and different types of coverage options, as the laws are changing every year for Medicare, there’s a lot of anxiety behind that transition. My mom is coming up on 65, like thousands of other baby boomers, and she’s really feeling a lot of anxiety about that change.
Baby boomers are transitioning from saving for retirement to withdrawing from retirement savings, from group health coverage to private health coverage, and then on the life side, hopefully they already have some coverage, but if not, or if they need more, that needs to be taken care of as well while they can still qualify and afford coverage.
Across the board, their needs are transitioning, so baby boomers definitely need an adviser — and if their employee benefit adviser isn’t going to be handling that transition, they should at least have referral relationships in place with other life and health agents who can.
Justin Bilyj: Gaps happen when advisers don’t understand the challenges their clients encounter when they eventually retire and separate from the company’s group plan. Retirees have three major hurdles to deal with at retirement: figuring out their health care options in a complicated Medicare system, preparing for the possibility of extended or long term care expenses, and figuring out how to not leave their family with any burdens or bills at a time when their plans possibly don’t meet those needs anymore.
Consider that half of all employees retire earlier than planned, and 60% of them do so because of health reasons. This can put retirees in limbo — they aren’t on Medicare yet, but they still need a health insurance plan, if their current plan doesn’t follow them into retirement.
But in the case of the other half of retirees that aren’t forced into early retirement — they must now navigate the myriad of Medicare options available to them, if their company doesn’t offer a retiree health care plan. Even for some retirees that don’t have to retire early, some will still find themselves facing a monumental decision, if they happen to have a declinable health condition. Since every person going onto Medicare gets a “free pass” at any plan without having to prove insurability, this makes the decision that much more important to get right — or suffer the consequences for the rest of retirement.
Delaware, Ohio, Texas and other state associations took to Capitol Hill to emphasize the value of tax-favored status for workplace health insurance.
Add on top of that, when someone retires, they often find that their existing life insurance policy increases in premium substantially, decreases in benefits for the same premium, or drops off altogether because the plan isn’t portable, which means it doesn’t follow them into retirement.
All of these potential pitfalls can be mitigated, if they have a knowledgeable adviser that can help them navigate these gaps – with or without the help from some outside assistance.
EBA: How can this gap be filled?
Bilyj: Employee benefit advisers should be educated on what happens to life insurance and healthcare plans when an employee retires, and they, in turn, should be educating employees about the possibilities whether their plan discontinues, changes, or stays the same into retirement.
To that end, advisers should try to stay current on the changes to Medicare and build at least a basic understanding of the different types of life insurance options available to seniors in retirement. We created our book to be a comprehensive guide to selling these types of products to seniors, so that can be a helpful introduction for advisers who aren’t as familiar with these individual life and health products.
One simple way advisers can serve retirees is by helping them obtain the necessary forms from HR to file with SSA to go onto Medicare Part B if they delayed taking it due to having an employee workplace plan while they were 65 or older.
Advisers who are serious about diversifying into this area can peruse the annual guide available to every Medicare beneficiary, “The Medicare and You” guidebook, or take the AHIP training required by CMS to sell Medicare Advantage and Prescription Drug Plans — but the important thing, for starters, is just to understand the sheer number of options facing baby boomers when it comes to how they receive their health care coverage.
Advisers can also use free quoting software, like Craig Ritter’s Medicare and Life Insurance Quoting Tool, to compare Medicare options or life insurance carriers in seconds to find the best coverage at the most affordable rate. Though it’s free for advisers, this price comparison service can be invaluable to retiring clients, because signing up for an overpriced plan can be the equivalent of starting retirement with an extra couple of utility bills, which isn’t the best way to begin living on a fixed income.
Shelton: I would say the top two strategies that can be used to help fill that gap are going to be either one, personally handling the transition into retirement for your clients or, if you prefer to stay focused on employee benefits, partnering up with another agent who is willing to handle that health and/or life transition for your clients.
I think it makes sense for a lot of advisers to handle that in-house, because individual life and health products are pretty close to what most employee benefit advisers are already providing. Besides, it’s a huge opportunity to continue serving baby boomers, which are widely known as the wealthiest generation and over the next 15 years they’ll be transferring $24 trillion in assets to their children. By playing a bigger role as boomers transition into retirement and begin transferring all that wealth, employee benefit advisers have a huge opportunity to fill that gap.
EBA: What are the products that advisers need to focus on with retiring clients?
Shelton: The top two are going to be retirement plans and health coverage. With health coverage, I’m looking at Medicare plans and other Medicare options, whether it’s a Medicare Supplement plan or a Medicare Advantage plan, and knowing the differences between these plans to recommend the right coverage is key. This will consider clients’ current health conditions, prescriptions they’re taking, where they live, if they travel often, what networks their physicians belong to and what their monthly budget for insurance is.
Retirement savings plans are another big one. Employees are building up peace of mind for all these years as they’re tucking money away and then all of a sudden when they retire, the income stops and they need to start drawing from the savings they’ve built, and the anxiety sinks in: How long will this last? The average lifespan is increasing — we’ll be crossing the average of 90 years shortly — so even if you retire at 65, you could easily live another 20 to 25 years past that. Baby boomers who are nearing retirement need a healthy mix of savings products, which might include indexed annuities and other safe-money products that are going to be very low-risk and pay out, because this is going to be their income moving forward.
Life insurance could also be a subsidiary product — hopefully they’ve already taken care of it by this point, but this would also be a good time to look at that as they’re reevaluating for retirement. For example, if they have a term policy and their health is not where it was, getting new coverage is going to be very difficult if they have a serious illness. A lot of term policies will guarantee conversion to whole life so they can retain their health qualification for the coverage they had — although the premiums will go up quite a bit. But even the convertibility options may not be that great, so educating workers on the limits of their term or permanent policy is paramount.
Bilyj: I recommend advisers contract with a Medigap company or two so they can offer health options to clients who are transitioning to retirement who may not have an employer sponsored plan. Offering Part D plans and Medicare Advantage can be a huge hassle, and it’s better to find an agent to partner up with who has the time to focus on the annual changes to coverage and networks that happen with those plans.
Advisers should have two permanent simplified life insurance companies they can contract with, as well. One should be a competitively priced carrier for healthy seniors, while the other should be one with forgiving underwriting and first-day coverage for those that have less than stellar health.
Advisers should also present fully underwritten life insurance plans to retiring employees who are healthy enough to pass underwriting. This can accomplish three objectives. The first objective is it gives the retiree a plan to help protect their family from the many things life insurance protects people from.
The second objective of offering a fully underwritten whole life insurance plan is that it doubles as a super-charged safe place to put money while allowing it to build tax-deferred with the ability to access it tax-free.
The third objective that a fully underwritten plan accomplishes is that it also builds cash value quicker, and the premiums are often less than simplified issue life insurance plans that are designed to be easily enroll-able following a short application or phone call into the company’s underwriting department.
Advisers should be ready to combat the onslaught of simplified issue life insurance mailers and commercials retirees will face, and be able to explain how they compare to fully underwritten options.
One last gap an adviser can help clients overcome is the long term care gap. Unbeknownst to the majority of people on Medicare, their plans don’t cover long term care or extended care expenses.
This comes out of the pocket or nest-egg, unless you have a long term care policy to take care of it for you. By demystifying Medicare for your clients, and helping them realize one of the larger causes for estate devaluations, you can earn referrals, a nice commission, a client for life and help them navigate this peril all at the same time.
