U.S. healthcare software triggers client reality check

(Reuters) - Brokerages are rolling out software to help financial advisers with a challenge that can seem like fortune-telling: projecting clients' retirement health care costs.

Rising healthcare expenses can eat away at retirement savings. Future total healthcare costs for a 65-year-old couple retiring this year will average $394,000 in today's dollars, according to a report this week by HealthView services, a retirement healthcare data company in Danvers, Massachusetts.

But a couple that retires in 2025 at age 65 will need $464,000 to fund those same expenses, which include various Medicare premiums, copays and dental visits. The bills only rise as couples live beyond average life expectancies, according to HealthView.

Financial advisory firms are beefing up their software to tailor projections of clients' retirement healthcare costs. The figures can drive home reality, especially as the tools become more sophisticated, advisers say.

The jolt is much-needed. Many Americans age 50 or more do not include healthcare costs in their retirement planning, even though the price tag is their greatest concern, according to a 2014 Merrill Lynch survey.

Raymond James added a new healthcare calculator to its financial planning software last year based, in part, on concepts developed by the MIT AgeLab, a Massachusetts Institute of Technology (MIT) research program that encourages the development of new technologies to support human longevity.

The calculator helps stimulate retirement planning discussions at Briggs Wealth Management in Clearwater, Florida, a Raymond James-affiliated firm. Advisers Kimberly and Dennis Briggs use it to estimate everything from future Medicare premiums to long-term care insurance premiums, she said.

The tool, part of a broader financial planning analysis, relies on clients’ answers to questions about family histories, chronic illnesses, and other factors.

Clients then review several future healthcare scenarios, which can be one based on their current strategy, and two others with and without long-term care insurance. The analysis, for example, showed one couple whose families had a history of medical problems that buying long-term care insurance could boost the probability of reaching their retirement goals from 40 percent to 76 percent.

Achieving those goals can depend on curbing current expenses to save more, Kimberly Briggs said. Putting a number on future healthcare expenses can motivate clients to scale back vacations or buy a smaller house, she said.

Merrill Lynch launched financial planning software last year that uses interactive graphics and charts to help clients understand future healthcare costs. Clients remember information more easily that way than after a long conversation, said Susan Acker, a Merrill Lynch adviser in Rochester New York. They interact with the program on Acker’s iPad by tapping on icons to see research and charts about their future costs.

Small firms are finding healthcare-focused tools in off-the-shelf programs such as MoneyGuidePro, a financial planning program by PIEtech Inc in Powhatan, Virginia.

The results of the process may surprise clients. Healthy retirees, for example, typically spend more on healthcare than those with medical problems, such as diabetes, according to HealthView, the data provider. That is because good health often means living longer.

(This version of the story corrects sixth paragraph to say that the Raymond James' calculator is based on concepts from MIT AgeLab, not a direct collaboration)

(Reporting by Dan Butcher; Editing by Suzanne Barlyn and Cynthia Osterman)