Could Being Healthy Actually Make Your Retirement Worse?

Last Updated Aug 23, 2011 6:07 PM EDT

In the past, I've advocated taking care of your health through better nutrition, exercise, and stress management as an important way to reduce your exposure to high bills for medical and long-term care expenses. But could this strategy backfire and actually cause you to spend more money during your retirement? One financial services firm suggests this might be the case.

HealthView Services employed a group of expert physicians, experienced actuaries, and healthcare industry programmers to develop its HVS RetireMark Planning System. With this tool, you can project your health care expenses in retirement based on your lifestyle and health status. Individuals and financial planners can use this system to refine someone's retirement planning by taking future medical expenditures into account.

I decided to take the RetireMark system for a spin by estimating the life expectancy and present value of out-of-pocket medical expenses for a 65-year-old male retiree, considering the medical costs that would be paid by Medicare. Presumably, this works out to be the amount of money you'd need in the bank today to cover expected medical expenses over your lifetime.

Here's how this present value varies for different lifestyle choices and medical diagnoses:


The system defines being healthy as having no diagnoses for common chronic diseases, not smoking, getting a physical exam every 12 months, eating a balanced diet, and exercising at least two hours per week.

As you can see, according to the RetireMark system, you'll end up paying more money over your lifetime if you're healthy than if you aren't. What's going on here? Isn't it better to take care of your health?

The answer is revealed by the resulting life expectancies.


In other words, if you take care of your health, you can expect to live longer. And this means you'll have more years during which you'll have to pay for medical expenses, and eventually you'll die of something, incurring medical expenses in the process. A recent study by the Center for Retirement Research at Boston College came to similar conclusions.

So should you start smoking, drinking excessively, eating lots of fatty hamburgers, and become a couch potato? No way! The truth is, it's not necessarily the case that you'll be worse off financially if you live longer. If you've maximized your guaranteed lifetime income from sources such as Social Security, pensions, and immediate annuities, you'll get more money over your lifetime that you can use to pay your medical bills.

And even if these projections and conclusions come to pass, it's still worth taking care of your health. I want to enjoy an active retirement, and I want to postpone the pain, suffering, and costs caused by chronic diseases as long as possible. And I'll look and feel better if I'm healthy -- my wife will like that!

If you do live longer, you may need more money to last for a longer retirement. So here's the retirement planning strategy I suggest:
  • Take care of your health, and plan to live longer.
  • Maximize your lifetime retirement incomes.
  • Develop strategies to pay for expected medical and long-term care expenses, including the appropriate insurance.
While it may take some time and effort to plan for a longer lifespan, the results are worth it in the long run.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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