When you think of wealth, what is the first thing that comes to mind? Most people would provide an answer that generally falls under the umbrella of financial assets. But in the words of the ancient Roman poet Virgil, “The greatest wealth is health.” The concept seems so simple when one thinks about it, as one usually cannot attain or enjoy wealth without good health. So how could something so obvious elude the average person? Why don’t people in general view good health as their most valuable resource above any monetary asset? There are no easy answers to these questions but there are three powerful forces worth exploring: psychological reactance theory, the need for approval, and present bias.
The late Jack W. Brehm, Ph.D, professor emeritus at University of Kansas, first proposed reactance theory in 1966. Steindl, Jonas, Sittenthaler, Traut-Mattausch, and Greenberg (2015) define reactance as, “An unpleasant motivational arousal that emerges when people experience a threat to or loss of their free behaviors.” They go further to say, “It serves as a motivator to restore one’s freedom. The amount of reactance depends on the importance of the threatened freedom and the perceived magnitude of the threat.” In a nutshell, one reason we may prioritize building financial wealth over maintaining good health is to avoid financial scarcity, and the limitations that come along with it. In our younger and middle-age years many of us are healthy, and do not perceive the threat to our health to be as high as the threat to our financial freedom. Only in our older years do the bulk of us begin to understand the true value of our health in relation to our monetary wealth.
Our inner peace and security is largely connected to how we feel about ourselves. Many people seek approval from others instead of focusing on self-validation. When others approve of the image we have artificially created, or our actions, we feel safe and emotionally secure. Ridicule or rejection on the other hand can leave us with a negative self-perception. A large number of people determine their worth by the amount and type of assets they possess, plus attributes that often coincide with one’s level of assets, including position titles, group memberships, residential neighborhoods, and status level within society. Conversely, people rarely receive “cool points” from their peers for maintaining good health. Continually adopting a healthy lifestyle is a matter of personal fulfillment.
The human brain has a tendency to fixate on short-term rewards above long-term goals. “Our emotional brain has a hard time imagining the future, even though our logical brain clearly sees the future consequences of our current actions,” says David Laibson, professor of economics at Harvard University. Obtaining wealth can determine where we live, what we drive, where our kids go to school, our outward appearance, where we travel, and what we eat today, tomorrow, next week, next month and next year. Pursuing an unhealthy lifestyle, or not striving for optimum health, may not adversely affect us until multiple years down the line. As a result, we generally give more weight to payoffs that are closer to the present moment and discount benefits further off in the future. This type of thinking, of course, is a fallacy because one can become ill or injured at any moment and for a multitude of reasons.
Did You Know?
According to analysis from Fidelity Investments, a 65-year old couple retiring in 2018 would need an estimated $280,000 to cover health care costs in retirement.
Managing Your Wealth (from a health perspective)
What is your desired retirement age? Whether you are currently retired or still working, do you realize your retirement years may be longer than those who preceded you? Yes, U.S. life expectancy technically dropped in 2017 for a third consecutive year, in spite of gains made in other developed nations, but major contributors to this phenomenon were sharp increases in deaths related to drugs, alcohol and suicides. The two leading causes of death in the United States, heart disease and cancer, have both declined over the past couple of decades. In fact, as of 2016, the cancer death rate has fallen 27% from its peak in 1991. Not to mention the potential impacts technological advances such as artificial intelligence, biotechnology and personalized 3-D printing may have on life expectancy over the next 15-20 years. Consequently, it may make sense to position your post-employment wealth portfolio to last over a longer period of time than anticipated in retirement. And since you can’t take it with you, establishing a sound wealth transfer plan for designated beneficiaries could also be a good idea.
If you’re still working, most of you are familiar with your current healthcare benefits, but what about after you retire? How might high healthcare costs impact your retirement portfolio? And what about expected healthcare inflation? A carefully crafted retirement plan should do more than simply address retirement living expenses. The plan needs to take potential health care costs into account.
Before you or your financial professional takes a deep dive into crunching the numbers, recognize that healthier living can directly contribute to (and be affected by) your financial bottom line. Of the different ways to manage your risk, the best is avoidance. If you can avoid or even delay certain health issues through a healthy lifestyle, you may actually preserve more of your assets in the long run.
For everything else, there are financial and insurance tools that can help alleviate the burden healthcare costs can have on a retirement portfolio. For example, according to LongTermCare.gov, the national average costs for long-term care in the United States in 2016 were:
• $225 a day or $6,844 per month for a semi-private room in a nursing home
• $253 a day or $7,698 per month for a private room in a nursing home
• $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit)
• $20.50 an hour for a health aide
• $20 an hour for homemaker services
• $68 per day for services in an adult day health care center
A long-term care policy can help shield your nest egg from nursing home, assisted living facility, or home health care costs.
Medicare supplement plans a.k.a. “Medigap plans” fill some of the gaps not covered by Medicare. For example, although Original Medicare, Parts A and B may cover many of your health-care services and supplies, other costs such as copayments, coinsurance, and yearly deductibles may be excluded. This is where a Medicare supplement plan comes into play. Medigap plans can also cover emergency overseas travel and Part B excess charges. The health services typically not covered by Medigap policies are:
• Long-term care
• Routine vision or dental care
• Hearing aids
• Private-duty nursing
• Prescription drugs
You don’t have to be retired to employ financial strategies related to health care costs. Health Savings Accounts (HSAs) offer a tax-advantaged way to cover healthcare costs and can serve as an alternative to tapping into emergency assets or credit cards. Others who have the financial wherewithal to pay healthcare expenses out of pocket may also find HSAs attractive due to the tax benefits and compounded interest over time. Furthermore, HSAs can be a convenient way to cover healthcare costs as they arise, without disrupting a household’s normal cash flow.
Tax-deductible contribution limits for 2019 are $3,500 for self-only and $7,000 for family coverage under a high deductible health plan (HDHP). To qualify, the HDHP must have an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) must not exceed $6,750 for self-only coverage or $13,500 for family coverage. The interest or other earnings on the assets in the account grow tax-free, and distributions from the account may also be tax-free if they are put towards qualified medical expenses. An HSA is “portable”, meaning it stays with you if you change employers or leave the work force.
Consider non-financial, health-related assets as part of your estate. Take for example the blood and tissue in the umbilical cord (connects the baby to the mother while in the womb), which used to be thrown away at birth, but now carries value as it was discovered they are loaded with stem cells. Stem cells have the ability to divide, renew themselves, and convert into specific types of specialized cells. After all, these are the cells responsible for the development of your baby’s organs, tissue and immune system. Cord blood stem cells are already being used in the treatment of nearly 80 life-threatening diseases. The fluid can be sealed in a bag and sent to a lab or cord blood bank for testing and storage. Like any other asset in your wealth picture, it’s wise to make preparations in the event you were to pass away.
Managing Your Health (by deploying your wealth wisely)
Before we discuss managing your health, let’s remember that your wealth spans beyond your financial assets. Good health is your most valuable resource, full stop. If, as the old saying goes, “time is money,” then time must be a valuable resource as well. Therefore, how we spend our time can be positively correlated with our overall health. Yet, the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics found in a report that only 23 percent of U.S. adults aged between 18 and 64 get enough exercise. This is despite the fact that studies prove consistent physical activity lowers the risk of many chronic conditions, disability, and mortality. What about setting aside time for stress reduction techniques such as mediation, deep breathing, yoga or massages? According to the American Psychological Association, chronic stress is linked to the six leading causes of death: heart disease, cancer, lung ailments, accidents, cirrhosis of the liver and suicide. And more than 75 percent of all physician office visits are for stress-related ailments and complaints. Sometimes simply having balance in our lives can promote healthy living. To translate healthy living into wealth terms, by failing to dedicate a portion of our time to aerobic and muscle-strengthening activities, for example, we are passively contributing to the potential erosion of some of our wealth in the long-run.
A data-driven, systematic approach to preventative care and managing health conditions has never been easier due to innovations in technology. With the assistance of health technology people can make small, simple changes today that yield substantial healthcare savings over a lifetime. Setting aside the future benefits, individuals who focus on their health in the present can feel better both physically and mentally, giving them more energy to pursue their daily goals and helping to provide emotional stability.
A new consumer health-tech term you may be familiar with is “health wearables”. These devices help consumers monitor glucose, heart rate, physical activity and sleep to gain a greater understanding of their health conditions. Some digital watches like the Apple watch and handheld ECG devices like ones designed by Kardia Mobile, for instance, can monitor your heart rate. DNA testing from providers like 23andMe can provide a comprehensive understanding of your genetics, and include genetic health risk reports such as those for age-related macular degeneration, late-onset Alzheimer’s disease, Parkinson’s disease, and more.
There are literally thousands of health and fitness apps out there. Here is a short list to help you kickstart the research process:
• Aaptiv (best for comprehensive training)
• Playbook (best for comprehensive tracking)
• Sworkit (best for comprehensive tracking)
• JEFIT (best for comprehensive tracking)
• Keelo (best for quick-hit workouts)
• Nike Training Club (best for comprehensive tracking)
• Strava (best for outdoor cardio)
• Lose It! Calorie Counter (best for nutrition tracking)
• MyPlate by Livestrong (best for nutrition tracking)
• Lifesum (best for nutrition tracking)
• HowUDish (best for nutrition tracking)
• Trifecta (best for all-around tracking)
• MyFitnessPal (best for all-around tracking)
• 8fit (best for all-around tracking)
• Fitness Buddy (best for all-around tracking)
• Couch to 5K (best for run training & getting off the couch)
• Calm (best for recovery)
• Sleep Time (best for recovery)
• Fitbod (best for getting fit, bulking up, or maintaining a routine at the gym)
• Mindfulness (best for recovery and timed meditation courses)
• Daily Yoga (best for practicing yoga)
To varying degrees, the technology is out there to help empower people seeking better health outcomes. Through your mobile device you can now access the platforms above and many more via your app store – anytime and anywhere – leaving no excuse for not taking ownership of your health.
Conclusion: Integrating Your Health and Your Wealth
As your most valuable resource, your health should be managed accordingly. Your financial wealth is not as important as your health but it is inextricably linked and can be key in determining your quality of life, what you ingest, and what treatments you are able to receive. Your physical and financial well-being do not have to be mutually exclusive. In fact, exercising prudence would dictate you integrate both areas of your life to achieve your future goals. Ensure you have a financial plan and a personal health plan.
Below are two roadmaps you may find helpful for lifelong health and wealth:
If you aren’t already, start living a healthy lifestyle today to have an important impact on your physical, mental and emotional health, plus a not so obvious interconnected area of your life: your financial health. Grow your financial wealth to give yourself access to more healthcare options. Through both channels manage your lifetime healthcare costs and live a healthy, fulfilling life.