Healthy or Wealthy: Best Way to the Second Is Via the First

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Healthy or Wealthy: Best Way to the Second Is Via the First
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Two non-consecutive days a week, I limit my food intake to about 600 calories. The other five days, I eat normally. I changed my diet based upon a PBS series and a related book titled "The Fast Diet: Lose Weight, Stay Healthy and Live Longer with the Simple Secret of Intermittent Fasting" by Dr. Michael Mosley.

I am not suggesting you consider following this food regimen. It can be dangerous if you are pregnant, underweight or have certain medical conditions. Nor should you consider making any major change to your diet without medical advice. But while I'm not competent to endorse this specific diet, or any other diet plan, it has become part of my focus on maintaining good health, along with regular exercise and daily meditation.

In my experience, many investors have their eye on the wrong ball. They are concerned about beating the market through stock picking, market timing or finding outperforming fund managers. Often these efforts fail. I don't want to downplay the importance of financial security. However, you would be well advised to spend at least as much (if not more) time focusing on your health as you do on the returns of your portfolio.

Retired and Healthy

Retirees, for instance, are deeply concerned about their health. A recent Merrill Lynch study found that 81 percent of retirees indicated the most important ingredient for a happy retirement was having good health. Only 58 percent listed being financially secure at the top of their list.

Given the importance of health to a good retirement, it's surprising that only 29 percent of those polled described themselves as "healthy and proactive," actively engaging in pursuits such as exercising and eating well. For those retirees, staying healthy was a source of pride.

Unfortunately 32 percent of those polled had chronic conditions that kept them from doing things they enjoyed. Only about 20 percent engaged in "key health behaviors."

The study noted the double whammy that health challenges can have on a financial plan. First, health-related expenses can drain retirement savings. Second, if you are compelled to retire early because of health issues, you will have fewer years to work and save, and thus less to live on, during your retirement.

High Cost of Health Care

The cost of health care in your post-career years can be staggering, depending on the length of your retirement. Estimated out-of-pocket health care costs for a retirement lasting 10 years are $50,900. However, if your retirement lasts 30 years, you can expect to pay $318,800 in health care costs.

Just taking care of yourself doesn't immunize you from the adverse consequences of unexpected health care costs. Women are likely to outlive their spouses. If one spouse develops serious health issues, the couple may spend down retirement savings and risk running out of money during the life of the surviving spouse.

%VIRTUAL-pullquote-Maintaining good health is your responsibility. It can't be outsourced. %Your financial adviser should be working with you to prepare for health care costs. It's a critical part of holistic financial planning. The study noted that less than 15 percent of pre-retirees have made any effort to estimate how much money they might need for health care, including long-term care.

Your financial adviser also should be educating you on your choices regarding Medicare, supplemental insurance plans and long-term care.

Maintaining good health is your responsibility. It can't be outsourced. There is ample evidence (some of it referenced in the study) that exercising, eating right, maintaining a healthy weight, staying socially connected and maintaining other healthy lifestyle habits can materially increase your chances of avoiding significant health issues.

Wealth without health is not a worthy goal. Maybe it's time to shift your attention from squeezing another percentage point out of your portfolio to squeezing some fresh fruit or vegetables in your juicer.

Daniel Solin is the director of investor advocacy for the BAM Alliance and a wealth adviser with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book is "The Smartest Sales Book You'll Ever Read."

10 Ways to Reduce the Cost of Retirement
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Healthy or Wealthy: Best Way to the Second Is Via the First
Eliminating your mortgage is one of the best ways to make retirement more affordable because it removes a sizable monthly bill. While you'll still have to pay taxes and maintenance costs for your home, those expenses are likely to be a fraction of your mortgage payments.
Once your children are independent, you will likely no longer need a several-bedroom house in a good school district with a large yard that can be expensive to maintain. Consider downsizing to a smaller home in a less-expensive neighborhood, and add the proceeds of the sale to your nest egg.
Where you live plays a big role in how much you pay for food, taxes and a variety of other services. Moving to an area where the cost of living is significantly less could allow you to spend down your retirement savings more slowly.
If you and your spouse commuted to separate places each day, it is likely that you each needed a car. In retirement, you might be able to get by with one car, thus eliminating the insurance, gas and maintenance costs of the second vehicle. In walkable communities with good public transportation, you may even be able to get by without a car in retirement.
In retirement, income tax will be due on withdrawals from traditional 401(k) and individual retirement accounts, but you can space out your withdrawals to avoid a hefty tax bill in a single year. Prepaying income tax on some of your retirement savings using a Roth IRA or Roth 401(k) allows you to avoid a big tax bill in retirement.
Investing in high-cost funds reduces your return. Minimizing investment costs is especially important for retirees who are living off income from their portfolio. In this case, selecting the lowest-cost funds that meet your investment needs translates to more money in your pocket.
There are significant penalties if you withdraw money from your retirement account too soon or too late. There is also a reduction in benefits if you sign up for Social Security early, and a late enrollment penalty if you delay signing up for Medicare Parts B and D. Pay attention to important retirement deadlines to avoid paying more than you need to.
Health care is likely to be one of the biggest and least predictable costs you will face in retirement. But there are some things you can do to control your health costs. Consider purchasing a supplemental policy to Medicare to fill in some of the gaps and cost-sharing requirements traditional Medicare doesn't cover. Also, shop for a new Medicare Part D plan every year to make sure you are getting coverage for your medications at the best price.
Retirees have the luxury of being able to travel whenever they want. Traveling is often less expensive if you avoid major holidays and school breaks, and most tourist destinations will also be less crowded.
One of the major perks of growing older is getting discounts at movies, museums and restaurants. While some senior discounts are well-publicized and open to everyone old enough to have an AARP card, others are available only to those who ask. A little research can add up to big savings if you’re willing to admit your age.
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