What’s the biggest threat to your retirement? Inflation? A stock market crash? Taxes?
It’s probably your health. More than any other issue, poor physical health (and the medical costs that come with it) can wreak financial havoc in your life. In many ways, poor health has a financial impact similar to rust or other corrosive agents on a water conduit. For a long time, the functional capacity of the pipe may not be impaired, but once a rupture occurs, there’s no chance of restoring the pipe–it is broken beyond repair. Likewise, you may be able to get away with being physically negligent during your early working years, but over time, the strain catches up with you. And when it does, there may not be a remedy.
Poor health adversely affects retirement in two big ways: It shortens one’s working years and increases expenses. A Spring 2013 MetLife Mature Market Study found that 37% of 65-year-old baby boomers who are “fully retired” stopped working earlier than planned because of health-related reasons. Recent commentary about the dramatic rise in applications for Social Security Disability benefits attributes the increase to aging baby boomers whose health is faltering before they reach retirement age. Fewer years in the workplace mean lower lifetime earnings and smaller retirement accumulations.
The increased medical expenses that come from poor health only compound the problem. A report from Fidelity Benefits Consulting released May 15, 2013, estimated that a 65-year-old couple retiring this year will need $220,000 to cover medical expenses in retirement. With limited savings and a dependence on government assistance, those with poor health may find their retirement decisions focused entirely on paying for healthcare.
In contrast, healthy workers have more employment options, work longer, earn more money, and have greater potential to save. Good health not only enhances earnings but can substantially reduce healthcare costs. Steve Vernon, author of Live Long and Prosper, estimates that pre-retirees and retirees “can reduce the odds of having high medical costs in retirement, and especially those associated with long-term care, such as nursing homes, by 75% simply by eating right, exercising, and reducing stress.” Vernon also states that, “Most of the diseases and illnesses associated with long-term care are due to lifestyle decisions.”
Opportunity costs are elusive calculations, but very real; neglecting your health will inevitably have financial consequences. If you want your future to include travel, leisure pursuits, and trips to visit the grandkids, you might want to buy a treadmill, skip the super-sized fast food meals, and sign up for yoga classes. Not only will you look and feel better, but indirectly, you’ll be saving for retirement.
Elozor Preil, RICP®, CLTC, is Managing Director at Wealth Advisory Group and Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). He can be reached at [email protected].
See www.wagroupllc.com/epreil for full disclosures and disclaimers. Guardian, its subsidiaries, agents, or employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation.
By Elozor M. Preil
