This time of year, many resolutions focus on improving personal finances. A good financial plan is about your goals and dreams. But is it also about your health?
In a recent blog post on the Forbes.com website, our friend and fellow financial planner (who also happens to be a medical doctor) Carolyn McClanahan suggests that your health status may be a crucial input into your overall financial plan.
Why? Because it helps you know how long your money will need to last—in other words, your longevity matters! If you have significant health issues at an early age, then you will probably spend more during retirement and use up your nest egg faster than if you’re hale, hearty and your family history has close relatives living past age 100.
The default assumption has been that people will live to the age on a standard life expectancy calculator—which would say, for instance, that a person age 49 has a 50% chance of living past age 85. However, people who live a healthy lifestyle probably have a proportionately greater “risk” of outliving their life expectancy, while a chronically overweight smoker might be expected to contribute to the other side of the statistics. In general, financial planning clients tend to be smarter and wealthier, which suggests that they’ll outlive the statistical averages.
Like McClanahan, we routinely estimate that our healthy clients will live to 95 and even age 100. For people with health concerns, we suggest that you visit www.livingto100.com, which is an online questionnaire/calculator that asks health-related questions and then tells you how long you can expect to live based on more than just the actuarial statistics. I tested it out with my “real” (healthy lifestyle) information and the site estimated I would need to financially prepare for living to age 97. When I gave different information—when I described myself as an overweight, beer-guzzling junk food eater and smoker—my life expectancy shifted to age 73. What a difference!
Of course, your lifestyle is only one component in determining your life expectancy. For example, if you have chronic conditions—like a cancer diagnosis or other significant health concerns—the averages won’t be as applicable to you. However, for most us, the point is that your health and lifestyle can greatly affect assumptions in your financial plan and your ability to achieve your financial goals. Perhaps “improving my health” should be at the top of your resolution list alongside improving your finances in 2018? Here’s to your success in realizing both!