• Posted September 29, 2023

Want a Healthy Old Age? Get Your Finances in Order Now

Planning for your long-term financial future doesn't just make good economic sense -- it could also save your life.

People in both the United States and the United Kingdom have a higher risk of dying prematurely if they aren't engaged in long-term financial planning, according to a report published online Sept. 27 in PLOS One.

In fact, the researchers found that the shorter a person's financial planning horizon, the greater their risk of dying.

“The people who live the longest are the ones who are looking years into the future,” lead researcher Joe Gladstone, an assistant professor of marketing at the University of Colorado Boulder, said in a university Q&A.

“It's very scary how many people are living week to week, month to month, paycheck to paycheck,” Gladstone added. “The majority of people are only looking financially out no more than a month ahead.”

The study further revealed that long-term financial planning is most important to the health of those with the fewest means.

Increases in financial planning were significantly associated with better health among households making less than $80,000 a year and with overall wealth lower than $450,000, the results showed.

“Planning benefits health for financially disadvantaged people more than the advantaged, because those with greater wealth and income have a financial buffer to income or expenditure shocks, insulating them from experiencing financial hardship,” the authors explained in their paper.

“These results are consistent with the idea that planning ahead represents an important resource for those with few financial resources, possibly as they do not have the buffer to cope with shocks,” the researchers concluded.

For the study, the investigators tapped into two large pools of data, one in the United States and the other in the United Kingdom.

The U.S. data tracked nearly 11,500 people over a 22-year period, between 1992 and 2014, while the U.K. data covered about 11,300 people for a decade spanning 2002 to 2012.

Short-term planners in the U.S. study had about a 20% higher relative risk of early death compared to long-term planners, the results showed.

The results were even more stark in the United Kingdom, with short-term financial planning associated with an almost 50% higher relative risk of early death compared to long-term planning.

“I think this really shows the importance of what we like to say -- your health is your wealth and your wealth is your health,” said Genevieve Waterman, director of economic and financial security with the National Council on Aging.

The stress caused by financial uncertainty is probably the main culprit behind this increased risk of premature death, said David John, a senior policy advisor with the AARP's Public Policy Institute.

“We know that stress hurts health and stress can kill, and having a longer-term financial plan is one way that people can reduce that stress,” John said.

“When people are asked what are some of the great stressors in life -- and AARP does research in some of this -- one that always comes up is having enough money in retirement or having enough money so that I can pay my bills,” John added. “It just makes sense that having longer-term financial planning as part of your life is going to reduce the risk.”

The researchers also posited that people with a long-term plan also can better afford the sort of preventive care that can head off chronic health problems.

However, John noted that this was an observational study that cannot rule out other factors that might influence the relationship between health and financial planning.

For example, people who actively plan their finances might also follow a healthier lifestyle, John said.

“You can't necessarily say that A equals B, the A being longer-term financial planning and B being reduced risk of death,” John said. “What you can say is that if you have a set of mental or physical characteristics that lead you to naturally do longer-term financial planning, the odds are very high that there will be a reduced risk of death at that point.”

Unfortunately, the low- and middle-income people who would most benefit from financial planning are the least likely to be able to access it, Waterman said.

“I would love to see more opportunity to provide universal access to financial planning and wealth management in general, and also provide universal financial literacy to understand the basics of finances,” she said.

John recommends that people trying to reduce their financial stress start by jotting down their purchases and expenditures for a couple of months -- everything from major bills to a daily stop at a coffee shop.

“Once you do that, it gives you an idea of what you're actually spending money on and whether that actually meets what you want or need,” he said. “In my case, for instance, I was a little bit surprised that I was spending as much money on small little items during the day that I didn't really need to.”

People also should include health care in their financial planning, Waterman said.

“What I've seen is that older adults tend to have higher costs for out of pocket -- such as deductibles, co-pays, prescriptions -- and it's not really factored into their overall budget,” she said.

More information

The National Council on Aging has more about financial planning for seniors.

SOURCES: Genevieve Waterman, DSW, director, economic and financial security, National Council on Aging, Arlington, Va.; David John, MBA, senior policy advisor, AARP Public Policy Institute; PLOS One, Sept. 27, 2023, online