Physical–and Financial–Fitness

A recent survey¹ by Bankrate.com states that roughly half (48 percent) of employed Americans aren’t saving more for retirement this year than last year. Furthermore, 13 percent are saving less. So apparently, many Americans need a way to save more. The surprising answer? Get in shape!

Health has a rather startling role as a driver of retirement savings, according to Health & Retirement Savings: Leveraging Health Care Costs to Drive 401(k) Contributions and Improve Health, a white paper written by Ron Mastrogiovanni (CEO of HealthyCapital and HealthView Services) and Dr. Raymond Weick (vice president with Mercy, a St. Louis-area health system). Case in point: by making a few healthy behavior modifications and taking prescribed medications, a 50-year-old man diagnosed with hypertension or type 2 diabetes could save around $2000 per year in out-of-pocket expenses, as well as add three to eight years to his life expectancy. This could then add roughly $44,000 to his retirement savings by age 65.

“What we’ve learned is that patients with chronic conditions don’t necessarily follow their health protocols, and that has a significant impact on their health care costs,” said Mastrogiovanni. “That’s where the savings lie.”

The Bottom Line as Motivation

Sad to say in light of serious health concerns, but Weick estimates that 20 percent of patients with high blood pressure don’t take their medication, and 50 percent will stop taking it within six months. What is one way, then, to motivate people? Money! A study that calculated the percentage of health care costs that can be offset by making healthier choices and then investing the savings² found a direct correlation between better health and increased retirement savings. Consider another example: a 45-year-old woman diagnosed with type 2 diabetes and high cholesterol could lower her annual pre-retirement out-of-pocket health care costs by more than $3,300, extend her life expectancy from 76 to 84, and — assuming she invested the savings in a 401(k) earning 6 percent annually — have an extra $108,000 at retirement.

So where do these savings come from? It’s a combination of out-of-pocket health care costs: prescription drugs, doctor visits, hospital visits, and health insurance, particularly. Since health care cost increases continue to outpace inflation, people are increasingly concerned about health care cost impacting their retirement. According to the Centers for Medicare and Medicaid Services, personal health expenditures are projected to increase by 2.2 percent in 2018 versus 1.9 percent for overall inflation.

What You Can Do

First things, first–if you have a chronic condition, get proper medical care for it and heed the advice of Mastrogiovanni and Weick: follow your doctor’s instructions. Doing so just might help you pay for your health care costs in retirement. And talk to Ambassador Advisors to further look at how health care savings can help to keep your finances healthy as well.

¹ From Bankrate.com

² Ron Mastrogiovanni, developer, HealthyCapital’s Health Magagement Retirement Funding Index

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