Your financial plan is about your goals and finances. But is it also about your health?
In a recent blog post on the Forbes.com website, financial planner and medical professional 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. If you have significant health issues at an early age, then you can probably spend more during retirement, and use up your nest egg faster, than if you’re hale 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. But people who live a healthy lifestyle probably have a proportionately greater “risk” of outliving their life expectancy, while a chronically oveweight 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.
McClanahan routinely estimates that her healthy clients will live to age 100. For people with health concerns, she asks that they visit 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. She tested it out with her “real” (healthy lifestyle) information and the site estimated she would need to financially prepare for living to age 102. When she gave different information—when she described herself as an overweight, beer-guzzling junk food eater and smoker—her life expectancy shifted to age 63. What a difference!
And, of course, the lifestyle component is only part of it. If you have chronic conditions, if you’ve been diagnosed with cancer or have other significant health concerns, you can throw the averages out the window. The point: your health and lifestyle can greatly affect the assumptions in your financial plan, and should not be ignored.
About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years. Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.
Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association.
A common reason to visit a REAL financial planner is to make certain you are saving enough for retirement and to decrease the chance you will run out of money once your paychecks stop.