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How Health Impacts Your Finances

By James McGurren

Almost half of Americans say running out of money in retirement is their number-one fear.[1] Their second biggest fear is declining health. Although these two fears may seem independent, they’re actually related. The state of your health in retirement can be a major determining factor in how long your money lasts.

We’ve all heard the saying “health is wealth” and it couldn’t be more true. Putting your health on the back burner when you’re young may not seem like a big deal, but all those bad habits can have dire consequences on your health and your retirement savings later on. 

Here are three major ways your health could impact your financial picture (and tips on how to stop it from happening). 

1. Poor Health Could Lead To Higher Healthcare Expenses In Retirement

Healthcare in retirement isn’t cheap—even for healthy people. The average couple turning 65 today can expect to spend $285,000 on healthcare costs.[2] This is after Medicare covers its portion, and it doesn’t include long-term care costs.

People with diabetes, high blood pressure, and other chronic illnesses are more likely to need long-term care in retirement.[3] These costs can be a drain on your retirement savings if you’re not prepared. The average home health aide in New York state costs $4,767 a month while the average private room in a nursing home costs $13,429 a month.[4]  

Over half of all people turning 65 today will need long-term care in the future, but this rate is even higher for those who are unhealthy.[5]

2. Poor Health Could Force You To Retire Before You’re Financially Ready

Many people today are pushing back their retirement dates so they can continue their earning years and enjoy the careers they have worked so hard to build.[6] But a recent TD Ameritrade survey found that 50% of workers are forced to retire earlier than intended—and the main reason is health issues.[7] 

Chronic illnesses like diabetes, heart disease, arthritis, and strokes can force you to quit your job and retire early whether you’re ready or not. In return, you have a longer retirement than anticipated and less money to live on. 

3. Poor Health Could Force You To Claim Social Security Early

If you’re forced to retire early, you may also be forced to claim Social Security as soon as you turn 62. If this happens, your monthly benefit amount is permanently reduced and you could miss out on thousands of extra dollars depending on the length of your retirement. 

The Social Security Administration calculates your monthly benefit amount based on your average earnings for the past 35 years. If you wait until your full retirement age—which is anywhere from age 65 to 67 depending on your birth year—you’ll receive that full amount. If you claim benefits at age 62, you only receive 70% to 75% of your benefit amount.[8] 

Likewise, your benefit increases if you delay Social Security after full retirement age. For example, if you start claiming Social Security at age 70, you receive 132% of your benefit amount.  

Choosing when to take Social Security is a highly personal decision. If you’re in poor health, you may want to take it as early as possible. But if your health isn’t currently impacting your life expectancy, you may be better off if you wait.

4. How To Stop Your Health From Negatively Impacting Your Financial Picture

The simplest way to stop these events from happening is to develop healthy habits now. Make exercising part of your daily routine and look for ways to stay mentally sharp. Eat more fruits, vegetables, and lean proteins and limit your sugar and alcohol intake. Visit your doctor for regular check-ups. 

While you’re at it, make sure you’re working healthcare costs into your financial plan and consider buying long-term care insurance. If you have a high deductible healthcare plan, you can also open a health savings account (HSA) and contribute as much as possible. For 2020, the maximum contribution limit is $3,550 for individual plans and $7,100 for family plans.[9] 

Regardless of your lifestyle habits, high healthcare costs are bound to be a major expense in retirement. Taking better care of yourself today is one way to actively reduce the costs you may pay later on. 

How We Help

At Simon Quick Advisors, we’re dedicated to helping you secure your financial future. If you’d like to talk to a trusted financial advisor about your current financial plan, we’d be happy to sit down and chat with you. During this meeting we can review your current retirement plan, make sure you’ve accounted for healthcare costs, and offer suggestions on how to catch up for retirement if needed. To get started, call us at 973-525-1000 or email info@simonquickadvisors.com

James McGurren is a managing director and client advisor at Simon Quick with over 30 years of experience in the financial industry. Jim focuses on providing customized financial planning and investment advice to high-net-worth individuals and families. Jim offers a highly personalized approach to client relationships and is passionate about helping clients navigate the challenges and complexities in their financial lives to deliver optimal outcomes. Jim received a bachelor’s degree in Accounting from Fordham University and is a Certified Public Accountant (CPA) and CERTIFIED FINANCIAL PLANNER® (CFP®) professional. Outside of the office, Jim enjoys spending time with his family, traveling, reading, and attending live music events. To learn more about Jim, connect with him on LinkedIn.





[9] https://www.cnbc.com/2019/06/03/these-are-the-new-hsa-limits-for-2020.html


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