Use wellness to gain wealth

Mike Dullaghan

Mike Dullaghan
DCIO Investment Specialist, 10/31/18


  • Making lifestyle changes to improve health can help save workers thousands in health-care costs.
  • If 401(k) participants re-direct savings to their retirement plan, they could save an extra $100,000 by retirement.
  • A recent survey found that rising health-care costs was a top fear among 74% of those saving for retirement
Living a healthy lifestyle could boost retirement savings, according to new research.

A study conducted by HealthyCapital found that a worker who is in good health may save nearly $109,000 more between the ages of 45 and 65 than one who does not manage their health well. The calculation assumes that the individual saves money from reducing spending on discretionary items and medical bills and adds that savings to a 401(k), earning an average rate of 6%.

HealthyCapital is a joint venture between Mercy, a U.S. health system, and HealthView Services, a health-care research and consulting firm.

The report cited several case studies, including one about a 45-year-old man who has been diagnosed with a chronic condition:

  • He is projected to spend $1,591 more annually out-of-pocket than a healthy person would
  • With a few healthy lifestyle adjustments, he could save an average of $3,285 annually before retirement, extend his life expectancy by three years, and reduce his pre-retirement health-care costs by $65,697
  • As a result, he could generate an additional $100,348 for retirement at age 65
Today, nearly half of the U.S. population has a chronic illness such as diabetes, high blood pressure, or high cholesterol. Obesity and smoking are also leading health issues among adults. The research indicates that people can save money on health-care costs if they follow their medical treatment protocols and incorporate some lifestyle changes to try to mitigate the impact of their illnesses.

Potential benefits for employers

Employers can also cut costs if their employees are healthier. A company with 5,000 employees could save approximately $2.5 million in health-care expenses by implementing a wellness program, the study noted.

Workers with chronic illnesses can cost employers $567 billion annually in medical treatment, wage replacement, and lost productivity (according to the Integrated Benefits Institute).

Another incentive to save involves goal-setting. When plan participants set savings goals, their contributions can rise to be 25% higher than those participants without goals.

Information can be an incentive

Information is a motivator for many savers. The more investors learn about health-care costs in retirement, the more likely they are to add to their savings. A 2016 study (by Nationwide) found that rising health-care costs was a top fear among 74% of those saving for retirement. Also, 64% of respondents expressed worry about how health costs may erode their savings.

Health-care costs have grown at a faster pace than wages and inflation for more than a decade. A Brightwork Partners study found that only 12% of workers have factored in health-care costs in their retirement plan and more than 80% of Baby Boomers underestimate what they will need in retirement.

By offering wellness programs or education geared toward helping workers understand the significance of health-care costs, employers may help 401(k) participants save more for retirement and see improved saving outcomes.

Are you interested in the connections between health and retirement wealth? Read my posts about health savings accounts and how Millennials use health savings accounts.

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