Warning: Failing to save for retirement may be hazardous to your health.
OK, that isn’t strictly true, but a cigarette-package-like warning might be the only way to get some nonsavers’ attention. And, according to a new study by two Washington University researchers, there really is a link between financial and physical health.
Timothy Gubler, a graduate student, and Lamar Pierce, associate professor of strategy at the university’s Olin School of Business, studied workers at an industrial laundry company that started offering free medical tests through a wellness program.
The tests found some abnormality, such as high blood pressure or high cholesterol, in nearly all of the workers. About half were diagnosed as diabetic or pre-diabetic, and 25 percent of the abnormalities were considered severe.
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The employees received suggestions for improving their health, and those with serious conditions were asked if they wanted to forward the results to a doctor.
Two years after the first round of tests, Gubler and Pierce checked to see if employees had done anything to improve their health. Some had, but many hadn’t.
It’s worth noting that the laundry company has a relatively generous insurance plan, so employees could afford to see a physician. The health assessments were confidential.
The company is also generous in another way: It matches 50 percent of employees’ 401(k) contributions, up to 6 percent of salary.
By comparing data from the retirement and wellness programs, the researchers noticed a pattern. Employees who were saving for retirement were also the most motivated to improve their health. Those whose health deteriorated over the two-year study were, in general, saving little or nothing in the 401(k).
Pierce and Gubler checked to see if people’s health problems were making it hard for them to save. No, the level of 401(k) contributions was uncorrelated with pre-existing medical conditions.
That means something psychological or cultural was causing some employees to be cavalier about both their health and their retirement planning, while others took a proactive attitude toward both subjects.
Pierce’s theory is that people differ in their time discounting preferences. In plain English, that means some folks plan for the future, while others live for today.
Saving for retirement involves sacrifices, as does improving your health: If you’re overweight, the doctor will tell you to eat less and exercise more.
In both cases, the payoff is years down the road. Even if you’re obese and pre-diabetic, you’re probably not going to die tomorrow, and you can worry about retirement when you get there.
It’s well known that people differ in their attitudes about the future. In one famous study, kids were left in a room with a marshmallow for 15 minutes, and told that if they didn’t eat it they’d get a second marshmallow. Follow-up research found that the kids who waited were more successful in school and less likely to use illegal drugs.
The difficulty, for employers or society, is devising a set of policies that can help impulsive types and planners alike. The planners are easy to reach: Give them some education and a financial incentive, and they’ll react.
The impulsive folks are why we need Social Security: If it wasn’t mandatory, they would retire broke. They’re also why we ban cigarette advertising and why former New York Mayor Michael Bloomberg wanted to ban giant sodas.
That was too much paternalism for most people, but Bloomberg understood human nature. Many of us want what makes us feel good today, even if we know it shortchanges our future.