IncomeConductor Adds Health, Social Security and Longevity Data

Advisors can see how individual health issues and expenses impact a client's financial plan and view Social Security claiming strategies.

By Rethinking65

WealthConductor LLC has launched a new product, Health+, as part of IncomeConductor, interactive retirement-income planning software for enterprise and financial advisor clients.

Health+ will automatically incorporate personalized actuarial longevity projections, Social Security claiming options and healthcare expense projections, including both Medicare premiums and out-of-pocket costs, into their client plans.

It will use data from HealthView Services that will allow advisors to clearly see how the clients’ individual health situation and related expenses impact their overall plan and assist them in choosing a Social Security claiming strategy that seeks to achieve the best income scenario.

“We are excited to incorporate HealthView data to deliver the kind and quality of information advisors and clients need to make informed financial decisions in retirement,” said Sheryl O’Connor, CEO and Co-founder of WealthConductor LLC, based in Hartford, Conn. “Healthcare expenses and not outliving one’s savings are consistently two of the top concerns retirees have. Oftentimes, advisors and clients must base decisions on ‘best guesses’ or go by outdated rules of thumb and may even avoid the uncomfortable conversation about the client’s longevity and health altogether. Having reliable data and instantly seeing the relational impacts of assumptions based on these data with IncomeConductor will undoubtedly lead to more reliable income plans.”

The following Q&A is designed to provide advisors with more detailed information about Health+.

1. You mentioned that Health View Services is working with you to integrate actuarial longevity projections, healthcare expenses (including out of pocket) and Social Security optimization data into IncomeConductor’s Dynamic Plan Editor. What does data from HVS add that you didn’t include before in income plans?

HealthView’s actuary-backed data set allows us to address a top concern of clients: retirement healthcare expenses.
• It includes Medicare Part B and Part D premiums, supplemental insurance (Medigap) premiums, and out-of-pocket (OOP) spending based on age, gender, and health.
• Medicare premiums also consider the impact of income-based IRMAA surcharges for higher-earning retirees, which can significantly increase costs.

Future health cost projections aren’t as simple as selecting one inflation rate and trending out from a current-year cost: Unique base projections are calculated based on the client profile, and unique inflation adjustments by coverage component are added, then adjusted by utilization factors on OOPs by age, gender, and health condition(s).

Actuarial longevity is projected — and utilized on both the healthcare and Social Security illustrations – based on the individual’s current age, gender, and health condition(s).

We find that personalization is key – being able to produce unique outputs based on the user’s profile is a significant feature of the tool (more information in #4).

In-retirement premiums are shown based on state of residence, and out-of-pocket costs are shown based on health condition(s) that the person may have (plus their state).

We can also run multiple comparative Social Security filing options so users can try out different claiming strategies and view their impact on lifetime benefits

2. How will this new data be accessible in IncomeConductor?

This data will be integrated into IncomeConductor’s Dynamic Plan Editor™ via API calls. No manual input is required.

The advisor and client can choose to use all three areas of the data — longevity, healthcare expenses, and Social Security projections — or any combination of those.

As soon as they change any of the plan assumptions, for instance, retirement date or Medicare policies, the plan will update in real time to illustrate the impact of those new assumptions.

3. How will this information be individualized for particular clients of an advisor?

A key component to the personalization is life expectancy — this tool produces a longevity estimate based on three key factors: current age, gender, and health conditions/lifestyle.

Each illustration — whether healthcare costs or Social Security optimization — is impacted by one’s life expectancy.
• It has a counter-intuitive effect on healthcare expenses: healthier people spend more overall than those with chronic health conditions over the course of their lifetime…because they live longer. Thus, healthier pre-retirees have all the more reason to start preparing for retirement healthcare costs today.
• It can drastically change the optimal Social Security filing age for a given case

Coverage selections (Medicare Parts B and D, supplemental insurance, and dental insurance) can each be toggled off and on by the advisor. So too can the various OOP components, costs which are dynamic based on coverage choices.
• For example, OOP prescription drug spending will be lower if Medicare Part D is selected, or higher if Part D is not selected.

State of residence impacts most premiums and out-of-pocket costs, as these expenses vary by location.

Income is a major driver of health costs, due to the IRMAA policy, whereby individuals and couples may pay surcharges on Medicare Part B and D premiums based on their modified adjusted gross income (MAGI) in retirement. These surcharges are directly deducted from Social Security benefits, proving a clear link between Medicare and Social Security. Social security benefit projections are shown both before and after these deductions, as well as Medicare Part B premiums, which is paid for regardless of income, and is also deducted from benefits.

4. How would you describe the accuracy of the data for any particular client? Do you include a percentage of the likelihood of the longevity/healthcare expenses?

The healthcare and longevity data is based on 530 million health claims across 70 million lives, and we update this data at least annually to account for the latest trends and legislation.

Data outputs shown in the tool are the 50th percentile outcome based on the unique scenario, but advisors can adjust the life expectancy to client preferences, if they so choose.

5. Can you explain how the Social Security optimization data works? Is this to help people determine when to take Social Security or can it also help in other ways that you can describe?

The Social Security optimization shows users the filing age (or ages, if married) that produces the greatest lifetime household benefit

It considers life expectancy, marital status, Primary Insurance Amount (PIA), Full Retirement Age (FRA), and future Cost-of-Living Adjustments (COLAs) on benefits

While the common assumption is to file at 70 to maximize lifetime benefits, each case (when considering the above info) has a unique “optimal” claim strategy. For each client, the tools will initially return three filing option: Earliest (as soon as possible, usually 62); Optimal (maximizing lifetime benefits) and Alternate (defaults to FRA but can be edited by user). The advisor and client may want to view how other claim strategies affect the client’s plan, so they are able to adjust the Alternate to any preferred age between 62 and 70 years old.

(As stated above) Medicare Part B premiums (everyone) and Part B & D surcharges via IRMAA (for higher earners) are deducted from projected benefits illustrated in the tool.

6. Can you give an example of how an advisor will see the impact of HVS data on a particular client’s income plan?

Many advisors use outside softwares to help them estimate life expectancy and optimal Social Security claiming ages. Unfortunately, they are each analyzed in a vacuum and the results are not coordinated with the other assumptions in a client’s overall plan nor are they automatically fed into the advisor’s planning software. Many advisors do not have access to good healthcare expense data and certainly not expenses projected based on their client’s health conditions.

Since IncomeConductor is used by many advisors to build a retirement income plan during virtual meetings, having the ability to instantly pull in Social Security optimal claiming ages, longevity estimates and healthcare expenses, including OOP costs, based on the client’s health situation, the retiree becomes fully engaged in the data and design of their personalized income plan. The impact will dramatically increase both the advisor’s credibility with the client and their closing ratios. To my knowledge there is no other retirement income software that instantly integrates personalized longevity, SS claiming strategies and health care costs.

Having Health+ takes the guess work out of the planning process. Sometimes what seems intuitive to the advisor is not the right answer for the client. For example, consider a case where the husband and wife are both retiring at age 62. The husband is in poor health, the wife has no chronic health issues and is a non-smoker, and their Primary Insurance Amounts (PIA) are the same. Given that situation, it would seem to make sense for the husband to claim early and the wife to delay claiming to age 70. With Health+ the optimal recommendation was for the husband to delay to age 70 and the wife to claim at 63. Just the opposite of what was intuitive. By using the optional claiming strategy recommended by Health+, the couple received $50,000 more lifetime benefits and the resulting legacy to their heirs was $250,000 larger.

Industry surveys have shown that health care costs have become the top concern for people transitioning into retirement, yet only 14% of advisors feel confident in having discussions with their clients about these costs. Health+ will be a huge differentiator for advisors in the marketplace, save them a lot of administrative time, and result in better, more reliable plans for their clients.

7. What will Health+ cost?

Health+ only costs $300 per year and can be added to either our Basic or Premium subscriptions. We have reduced pricing for enterprise agreements as well.

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