Connecting health and wealth for a better financial future

Positive lifestyle choices can not only help people enjoy longer and better lives in retirement, they can also have a financial benefit by managing future health care costs. That’s a key finding in the latest health care survey conducted by the Nationwide Retirement Institute^® in partnership with The Harris Poll.

See highlights from our 2021 Health Care survey here.

In August, we surveyed over 1,800 adults age 25 and older about their attitudes and behaviors around health and planning for retirement. The general results of this survey found that many people see the benefit that caring for their health and wellness can bring to their financial future. There are also opportunities for financial professionals in making a stronger connection between health and wealth planning.

Primary focus on health and wealth

An overwhelming majority of adults who responded to our survey said health and wellness are top priorities (86%). A similar percentage of adults reported taking preventative measures today, including regular check-ups, immunizations and health screenings, so they can prioritize their health in the future.

Still, four in five survey respondents said they want to do more to prioritize their health, recognizing the connection between good health and wellness and their financial future. Nearly 90% of adults surveyed believe their current lifestyle choices, such as focusing on self-care and mental health, will help them save money on their future health care costs.

Moreover, many adults are taking the next step in making the health-wealth connection. Of the people in our survey who said they currently work with a financial professional, 61% said they talk with them about how their health and wellbeing could impact their wealth.

Often, people don’t see the connection between health and wealth unless something happens. That’s something I learned earlier in my career when I worked as a health insurance professional; that as individuals age their two greatest concerns are their health and wealth. One visit to a hospital emergency room or a medical specialist can quickly underscore how significant out-of-pocket health care costs can be.

It’s encouraging to see the results of our Health Care survey reveal the steps many people are taking to prioritize their health before an emergency occurs. Preventative measures and health screenings can identify health issues before conditions get worse. And when speaking of out-of-pocket expenses, the costs of prevention are much less than the costs of treatment, especially for serious health conditions. But not all health issues can be planned for, which is why making a financial plan for health care costs is so important.

COVID changed the game

The coronavirus pandemic has had an unprecedented impact on a wide range of aspects of people’s lives. Many respondents in our survey (61%) said they worry more now about own health than they did before COVID-19. Even more (67%) are more worried now about their family’s health than they were previously.

Worries about COVID have spread to people’s financial lives as well. 53% of adults in our survey said the pandemic led them to worry more now about their own financial stability. In some cases, the urgency of the pandemic encouraged positive financial behaviors. Because of the impact of COVID-19, a quarter of adults we surveyed said they have saved more or plan to save more in an emergency fund, while around another quarter (26%) have paid off or plan to pay off existing debt more quickly.

How to help clients build confidence

There’s much that financial professionals can do to make the connection between health and wealth. It’s likely that clients will be more receptive to these discussions, due in large part to the effects of the pandemic.

Many people lack confidence in their ability to achieve their most important financial and wellness goals in retirement. A nearly equal number of adults polled in our survey told us they are either somewhat or not at all confident in their ability to have a successful financial strategy (48%), to maintain good physical health (48%), or to manage and pay for future health care costs (47%).

Two causes for this lack of confidence are fear and uncertainty. Financial professionals can focus on these areas to begin drawing connections between health and wealth for clients.

Among the fears of people planning for retirement is out-of-control health care costs. In the views of our survey respondents, rising health care expenses, physical health and inflation were cited as the top factors that will impact their retirement health care costs. Taking steps within a client’s financial plan, such as factoring in rising health care expenses when setting savings goals, can help address client fears and build their confidence.

Financial professionals can also counter much of the uncertainty clients have about health care costs, while helping develop plans to address the need for greater savings to cover these expenses in retirement. Among those adults who have taken the time to estimate their retirement health care costs, $2,200 was the median annual estimate. (55% of adults in our survey said they weren’t not sure or could not estimate these costs.) The reality for today’s retirees is much different; according to the 2021 EBRI Retirement Confidence Survey, people age 65 and over actually pay $6,700 or more in health care costs.

Making the health-wealth connection

Financial professionals can strengthen the health-wealth connection with clients by helping them develop concrete plans to cover retirement health care costs. You can start with a picture of their expected out-of-pocket costs, using the Nationwide Retirement Health Care Cost Assessment. It’s a simple tool to help clients see what to expect to pay for health care services and premiums when they reach retirement.

Helping your clients with their Medicare decisions starts with conversation. One resource Nationwide offers to financial professionals to help with Medicare discussions is the My Medicare Matters^® tool. We developed My Medicare Matters in collaboration with the National Council on Aging (NCOA) to help clients understand their Medicare options, estimate their potential out-of-pocket costs and walk through the Medicare enrollment process.

Learn more about My Medicare Matters here.

Health savings accounts (HSAs) are another topic for the retirement health care cost discussion. Even with half of the employed adults in our survey said they have access to an HSA at work, only 35% participate or contribute to their workplace HSA account. Plus, most of those workers are using their HSA for current health care expenses.

Health savings accounts have features to help clients across multiple generations (Millennials, Gen Xers and Boomers) build a financial plan for future health care costs. As a financial professional, you can educate clients about the triple tax benefit and portability features that HSAs offer.