When we ask our clients to describe their ideal retirement, two of the most common responses are “healthy” and “stable.” In our experience, most successful retirees find ways to align these two goals … and throw in a little fun as well. In fact, it seems that there may be a psychological connection between how we plan for our money and how we plan for our health. The Association for Psychological Science published a study a few years ago that indicated there is a correlation between a person contributing to a 401(k) plan and that same person taking positive steps to improve their health (1).
Better health and better financial discipline are also two common New Year’s Resolutions that tend to sputter out this time of year. That’s because “resolving” to do something isn’t specific or actionable enough. We’d all like to “be healthier.” But it’s developing a habit like going to the gym three days a week that helps make it more likely that you will achieve that goal.
Here’s why developing good habits can lead to big dividends down the road for both your health and your nest egg.
The Harvard School of Public Health studied how five habits affected long-term health: eating well, exercising regularly, maintaining a healthy body weight, avoiding smoking, and drinking alcohol in moderation.
According to the study, women who adopted four of these habits by age 50 lived 34 more years free of diabetes, cardiovascular disease, and cancer than women who did not. Men who adopted four of the five habits lived 31 more years without developing these diseases (2).
Now, there are no guarantees in life. But if changing a few bad habits could, potentially, add healthy decades to your golden years, shouldn’t this be the year you make some positive changes?
Of all the tools that make up your financial plan, nothing has a bigger and more immediate impact than your spending. How many of these healthy spending habits can you check off?
- Spend less than you earn.
- Set a monthly spending plan and stick to it.
- “Pay yourself first” by making automatic monthly contributions to savings and retirement accounts.
- Pay down credit card debt every month.
- Maintain an emergency savings account.
So, how did you score? Are there adjustments that you can make to some items on this list (cancelling that club membership you never use) that will help you reach your goals in other places (maxing out your retirement plan and IRA contributions for the year)?
What I like about this list is that every item is a habit that you can adopt right now to help make a big impact on your financial well-being. Just like you can’t “be healthy” without hitting your weekly exercise goals, you can’t improve your finances solely with good intentions. What you can do is dig into your monthly budget and look for inefficiencies and unnecessary expenses. Your mortgage payment is your mortgage payment. But if you’re nearing retirement, the money you’re spending on extra vehicles or letting your adult children piggyback on your cell phone plan could probably be put to better use.
The relationship between your money and your health is something we will be monitoring closely once you do retire. Without a monthly paycheck and employer-subsidized health care coverage to fall back on, your nest egg will have to pay for whatever Medicare doesn’t. If you or your spouse have any significant health issues or prescription drug needs, choosing the right Medicare options will be especially critical to keeping your out-of-pocket expenses under control.
One way to keep those expenses low is to improve your lifestyle now. A study by the American Journal of Preventative Medicine linked the healthy habits we discussed above to significant health care cost savings for seniors (3). By controlling things you can control early in your retirement (seriously, stop smoking!) the money you save on health care could provide a cushion later in retirement if something unexpected happens, or if you or your spouse need in-home nursing or an assisted living facility.
A healthier lifestyle can also give you more options for enjoying the assets you’ve worked so hard to save and grow. Do you want decades of bad eating habits to keep you and your spouse from taking that dream trip to Europe once you retire? If a lifelong lack of exercise creates a serious health problem at 65, the money you earmarked for a move to Florida might have to cover gaps in your Medicare coverage.
Adopting better financial and health habits might sound restricting. But the more disciplined you are when you’re younger and still cashing that monthly paycheck, the more options you’re likely to have later in your life to explore the world, follow your passions, and draft a better blueprint for retirement. And for those of you that are already retired, there’s still time to embrace these healthy habits. In my fifties now, I have come to realize that discipline is not a lack of freedom, but rather, discipline equals freedom, and with that freedom comes more choices down the road.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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