Retirement is expensive: The average couple can expect to spend $280,000 on health care costs in retirement, not including the cost of long-term care. Retirement spending varies from person to person, of course — but across the board, health care costs have been rising faster than inflation. Offering union retirement plans with health insurance can end in positive results for both the board and its members, especially when coupled with consistent retirement planning assistance.
Retiree Health Care Needs
As we age, our health care needs evolve. Bone, joint and muscle problems become more frequent, and chronic conditions — like osteoporosis, cardiovascular disease and diabetes — become more common. Some challenges are driven by a person's lifestyle, but others are simply a product of aging.
It's a common misconception that Medicare will cover 100 percent of care needs, and this often keeps people from planning and budgeting for premiums, deductibles and cost-sharing expenses related to Medicare parts A, B and D in addition to supplemental insurance premiums and other out-of-pocket spending. An active union board can get involved with its members not only by educating them on how to financially prepare for retirement but also by offering union retirement plans that help fill Medicare gaps.
Positioning Members for Success
The average retirement age is 63, two years before full eligibility for Medicare begins. Without a union-sponsored health plan, those who retire early may find themselves scrambling to afford care, especially if they're among the 52 percent of Americans ages 55 and older with no retirement savings. Helping members avoid these situations and succeed in retirement begins with getting them to think about when they plan to retire and what their future needs will look like.
As members enter the union, no matter their age, it's wise to provide information on the importance of making contributions to a retirement account. In addition, inform members of nontraditional savings mechanisms such as health savings accounts (HSA) if the union's chosen insurance plan offers them. HSAs allow users to save pretax dollars and make tax-free withdrawals for qualified medical expenses — either while working or during retirement.
And as members age, help them budget for retirement. Remind those ages 50 and older that they can make catch-up contributions to IRAs and 401(k)s. At 55 years old, they can also begin making additional HSA contributions. Help members predict what their expenses will be, starting with a list of their current expenses and noting any items that are offset by a union-sponsored benefit (such as health insurance premiums). Then, direct members to their insurance provider, who can take them through how those costs might change during retirement and provide information on Medicare and what the program covers.
Offering Insurance in Retirement
There is significant benefit for both members and the board in offering a union retirement plan that includes health insurance. On the union's end, offering a strong retirement plan can help engage membership in their health, fostering conversations about lifelong wellness in the context of support and goodwill, not uncertainty and fear. Retiree health insurance also serves to build a greater bond between members and the board as members see just how invested the union is in their well-being. Members and families gain the benefit of consistency when their insurance coverage comes from the same provider they had during their working years, giving them the opportunity to remain with their preferred doctors and networks.
Retiree health insurance can even improve work dynamics for members before they retire. Those who work beyond a traditional retirement age report many reasons for doing so, but chief among them is the need to maintain insurance coverage. When older members remain in the workforce, "younger people could face career stagnation or feel forced to change employers to get a promotion," Julie Stone, a senior health and benefits consultant at Willis Towers Watson, told the Society for Human Resource Management. And, according to Kevin Mahoney, senior institutional consultant at the Mahoney Group of Raymond James, "Those who are still working solely because they can't afford to retire tend to be less healthy, highly stressed and disengaged from their jobs."
Union boards are well-positioned to help their members plan for retirement. Long- and short-term strategies for member retirement that focus on consistent saving and budgeting, coupled with retiree health insurance, go a long way toward helping members enjoy success after working, building a loyal union membership in the process.