19 Oct A prescription for healthier retirement savings through wellness
BY TIM MINARD
For years, most people looked at their physical health and their financial situation as two very different issues. But that’s changing. Today, the overwhelming majority of American workers recognize the link between health and wealth. Our recent survey found 84 percent of workers see physical health as an investment in their financial future.
Employers are also beginning to see employee wellness as an investment in the financial condition of the business. Healthier employees can lead to a healthier bottom line due to increased productivity, decreased absenteeism and—most significantly—reduced healthcare costs for the business.
There is another side benefit from wellness in the workplace that is gaining attention. Wellness programs may just be what the doctor ordered to boost retirement savings. Employees with fewer health problems logically would potentially have more money available to save for retirement. And down the road, healthier retirees could potentially spend less of their nest egg on medical expenses.
Because it is getting harder to separate health from ultimate wealth at the employer and employee level, discussions about benefits will likely focus more and more on the idea of total wellness. No matter what kind of benefits you sell, having a good understanding of the intersection between wellness benefits and retirement plans helps position you as being on the leading edge of this burgeoning trend.
Fortunately, the body of research proving the connection between physical and financial wellness and the positive impact on both employee and employer is growing.
Here’s a closer look at some compelling proof points that demonstrate the overall benefits of a total wellness approach:
Financial benefits to employees
- The short- and long-term costs of chronic diseases. Diabetes, for instance, has a known cost. The American Diabetes Association says for every dollar a healthy person spends on healthcare, a diabetic employee will spend $2.30. Obesity is also known to raise medical costs by 41 percent and boost prescription drug costs by 80 percent. In fact, the U.S. Centers for Disease Control says almost 10 percent of U.S. medical costs are attributed to obesity.
- Wellness programs reduce health risks. A brand new study conducted by Principal Wellness Company of 12,000 adults, found that participants in comprehensive workplace wellness programs achieve a significant reduction in health risks in as little as 18 months. For individuals participating in one-on-one health coaching, more than one in three (34 percent) moved from a high risk status to a lower risk category. This shift significantly decreases their likelihood to develop diabetes, heart attack or stroke. The percent of participants considered low-risk increased by more than 11 percent.
- How wellness can help employees free up funds for additional savings. By spending less on healthcare today, employees have more money to set aside for retirement. Take, for example, the case of someone who smokes 10 cigarettes a day. Using the calculator at www.smokefree.gov, if he quits and diverts what he had been spending on cigarettes ($5.73 a pack) to a retirement account, that savings would amount to an estimated $12,773 in additional retirement savings over the course of 10 years.
- Ways improved health can help to reduce healthcare expenses duringretirement. Those reduced costs can help make retirees’ savings last longer. That’s a huge benefit in light of the Employee Benefit Research Council’s estimate that a typical, moderately healthy retired couple will need to have saved over $250,000 just to address unreimbursed healthcare expenses (and premiums) throughout an average retirement.
Financial benefits to employers
- For every dollar an employer spends on a wellness program, its medical costs are improved by approximately $3.27 — and another $2.73 in savings is realized in lower absenteeism costs, according to the Health Management Research Center at the University of Michigan.
- Healthier employees can also lead to soft cost savings, such as higher-energy employees and increased levels of engagement in their jobs.
There is one other way that wellness programs can help retirement programs. The wellness folks have learned that when it comes to motivating participation, incentives work.
It’s not surprising that the number of employers offering wellness programs continues to increase. The Society for Human Resources reports that in 2012 just over 60 percent of American workers have access to wellness programs that also offer incentives if they participate.
A new white paper, Wellness = Retirement Savings, offers insights into how wellness programs and retirement plans can work together and can help you be prepared for the inevitable total wellness discussion.