Benefits Products & Services
The wellness/retirement connection
Principal Financial says they belong together in long-term financial planning
By Thomas A. McCoy, CLU
One of the most effective retirement planning tools an employer can offer may be one that isn't considered a retirement product. It's a wellness program. That's because an employee's health can either sabotage a retirement plan or enable it. A wellness program can be a long-term solution to a long-term challenge—maximizing an employee's potential for good health both before and after retirement.
The impact of health care costs after retirement is not hard to visualize. For example, a study conducted by the Employee Benefit Research Institute (EBRI) in 2010 showed that a moderately healthy couple would spend an average of $250,000 to pay for unreimbursed health costs over a normal retirement.
Health care costs also can derail retirement strategies before retirement. Just look at the growing number of baby boomers who say they want to work more years to make up for low retirement account balances (the "I'll just work till I'm 90" crowd). This year's Retirement Confidence Survey, conducted by EBRI and Greenwald & Associates, shows that the proportion of employees who plan to work past age 65 has risen dramatically, from 11% in 1991 to 37% currently.
The trouble is, health problems are preventing a large percentage of these employees from carrying out this strategy. The same EBRI study finds that more than half of current retirees left the workforce early due to health problems, disability or business changes at their employer, such as downsizing.
In a Principal Financial survey of growing businesses with 10 to 1,000 employees, conducted online during the second quarter of this year by Harris Interactive, 84% of workers said they view physical health as an investment in their financial future. Three quarters of those surveyed (76%) think that by spending time and money on their physical health now, they will avoid major health costs later in life.
While no amount of lifestyle control will alleviate some health problems, participation in wellness programs, particularly with effective coaching, is generating some impressive results. (See Len Strazewski's "Benefits Business" column in the August issue, page 16.) Improvements in weight control, blood pressure and other gauges are not only short-term victories, but also long-term ones—with the potential to dramatically boost chances for financial retirement success.
With the shift from defined benefit to defined contribution pension plans over the last generation, employees have had to learn to plan for their own long-term financial future. The lessons have been hard. Many employees have stumbled by undersaving and making investment mistakes, and the financial markets have dealt some cruel blows.
The good news is that employees have come through it with a better grasp of what long-term retirement planning is all about. They know they have to take responsibility themselves today for their long-term financial security. The use of target date funds has simplified the complex array of fund choices for employees and helped them focus on their long-term financial future.
Lee Dukes, president of The Principal Wellness Company, The Principal Financial Group's wellness subsidiary, believes that maximizing the performance of individuals' retirement accounts inevitably depends on their long-term health management. "We want employees to be thinking about both their physical health and their financial health, and we see a direct correlation between the two," he says.
The Principal has a big stake in both wellness and retirement plans. It has provided wellness programs for almost 20 years and has developed its own stable of 25 health coaches. In the retirement space, a 2008 Spectrem Group analysis ranked Principal Financial first in total number of bundled 401(k) plans (those providing both administrative and investment services).
"Instead of focusing only on saving more for retirement, employers can put a much greater emphasis on helping employees stay healthy so they spend less on health care," says Dukes. "Spending less means they will potentially have more to save."
Each of The Principal's health coaches has at least a four-year degree in a health-related field like dietetics or behavioral health. They also receive ongoing training. Their work with employees is low-key and consultative, Dukes explains. "Once an employee has been through the initial health screenings, those who agree to participate in the coaching program receive regular contacts from the coach.
"Rather than tell a person that he needs to lose weight—which you can't force him to do anyway—the coach talks about what the employee enjoys doing." That leads to a mutually determined plan to develop a healthier lifestyle that can help the participant do more of what he or she enjoys.
Last year, The Principal expanded its wellness program from consulting directly with benefit plan administrators to working through brokers—both property/casualty-based and pure benefits firms—who wish to develop their own branded wellness programs. "It can provide a good source of fee-based revenue for the broker," says Dukes.
"We already have about 25 firms that use us as their back office for a wellness program," he says. "We maintain the portal access, perform screenings and do health coaching, and the broker offers the program as a service to clients."
Whether an employee is planning to work a few more years to boost a 401(k) balance or calculating a withdrawal rate in preparation for retirement, all bets are off when health problems get in the way.
"Employers understand that an effective wellness plan may help reduce health care costs," Dukes observes. "But wellness plans may also boost the success of their retirement plans."
For more information:
The Principal Wellness Company
Web site: www.principal.com/wellness