By Thomas Kostigen
The healthier you are, the more likely it is that you will be richer, too. But that is both a blessing and a curse.
A National Bureau of Economic Research study shows healthier households retire with, on average, three times as much money as less healthy households. Being physically fit stave’s healthcare costs and, as other studies prove, is positive for the global economy. In fact, a small increase in fitness—for example, just a few minutes more per week of walking—by the percent of the global population who are unfit could amount to more than $100 billion added to the world’s economy on account of additional productivity in the labor force and fewer drains of medical expenses.
When health is applied to financial planning, the results are equally as surprising—for different reasons. Nearly half of all the people surveyed in the NBER study, which divided health into poor, average and good, says they are concerned they will not be able to pay for healthcare in old age. The healthiest were the least concerned.
The least healthy percentile of people examined struggle the most to save for retirement in general. Largely, they are forced to use financial assets to pay for “health shocks” and related expenses earlier in life, preventing them from using and compounding those assets for later years.
But this doesn’t necessarily mean that being healthier translates into more responsible financial planning. The healthiest of the group NBER studied have not properly planned for longevity. The catch with being healthy is that you’ll need more money in old age. As most of us know, physical fitness leads to a higher likelihood that you’ll live longer. And that means you’ll need more money to live on. So while being physically fit can reduce medical expenses, healthcare costs, and often means you’ll remain longer in the workforce accumulating income and benefits, an implicit message of good health should also be taken: save and invest so you can enjoy those healthy golden years.
Those on the opposite spectrum, the less healthy, have an added burden to retirement saving: insurance costs become prohibitive. Many may not even be able to purchase insurance products that can relieve financial burden in older age. However, no matter rich or poor, neither group takes full advantage of the plethora of helpful investment products on the market.
Annuities, for example, are under-utilized, the NBER study says. Even more traditional retirement products, such as 401(k) plans are not maximized. Complexity and a lack of understanding seem to put people off from super charging their assets. “The complexity of financial options in retirement, as well as during the asset accumulation period, is one reason that default options have gained such traction in many areas of retirement planning,” the NBER study found. Choosing the “default option” for pretty much any investment product, isn’t ideal. It’s a “one size fits all” choice that could leave dollars on table and not put to best use.
Financial advisers typically take into account a client’s health and wellness factor when putting together a financial or retirement plan. In the short term, this might mean adding to a health savings account, if a client is unhealthy. For healthier clients, that targeted HSA money might instead be directed toward a retirement savings account. The details of each plan and the nuances of tailoring an investment program for the healthy and the unhealthy alike can, of course, become complex. Which is reason why an investment adviser likely should be sought.
Some advisers have even been known to recommend a good doctor or personal trainer. Being healthy, wealthy, and wise is actually, really good advice. And it turns out, they go hand-in-hand.
Thomas Kostigen is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
