MMM Newsletter and Website Header 10.2.15

By Rob Williams, Charles Schwab & Co., Inc.


Key points


  • Researchers have identified interesting links between health and wealth that underscore the benefits of retirement planning.


  • Even if you’re not a born planner, you can still take certain steps to help reach your goals.


  • We discuss four strategies to help you start retirement planning now.

Health and wealth are often related. That may sound intuitive, but the interconnections between the two may surprise you. They can also help shed light on some of the key challenges of retirement planning.

We know that health woes can hurt your finances. For example, a prolonged illness can lead to high medical bills and keep you from working. Researchers have also shown that financial troubles can be bad for your physical health, causing everything from stress, depression and insomnia to headaches, high blood pressure and eating disorders.

There are other connections, as well. A growing body of research has revealed that efforts to preserve your physical and financial health can be hindered by similar behavioral obstacles. Fortunately, it’s also turning up some intriguing options for managing this behavior.

Here, we’ll take a closer look at some insights from the world of behavioral research and discuss how investors can incorporate them into their retirement planning.

Preserving well-being

Most people may know — intellectually, at least — what habits tend to encourage success. But getting into these habits can occasionally prove challenging.

For example, exercising regularly is generally considered to be part of a healthy lifestyle. But that doesn’t make it any easier to go for an early-morning jog. So it goes with working toward a financial goal, such as saving for retirement. We may appreciate how important it is to save and invest, but it’s not always easy to make the right financial call. So how do we make it easier to go from understanding what we should do to actually doing it?

A propensity to plan

Researchers have studied why otherwise similar households appear to accumulate different amounts of wealth over time and identified one major factor: retirement planning. In fact, one study found that people who plan — that is, people who determine how much money they’ll need in retirement and create a savings plan to get there — at the median accumulate three times the amount of wealth that non-planners do.

Unfortunately, not everyone is good at retirement planning. In fact, some people appear to have a natural “propensity to plan,” and researchers have shown that such people are typically better at controlling their spending and reaching their financial goals.

They also tend, on average, to make healthier choices in their day-to-day lives. One study asked survey respondents about a variety of health and finance-related planning topics — for example, “do you eat a healthy breakfast every day” and “do you have a monthly budget and do you tend to stick to it” — and found that planners do well at both.

But what if you don’t have that propensity?

Forming habits

Wanting to accomplish a given task — whether it’s working out or saving enough for retirement — doesn’t guarantee that you will. Sometimes other habits get in the way.

The good news is that researchers have identified some retirement planning tools you can use to change certain kinds of unhelpful behavior. Broadly, the elements of effective retirement planning include:

  • Intent. This is a simple matter of wanting to achieve a given goal.


  • Action steps. This is where you plan when, where and how you take certain steps toward accomplishing your goal. If your goal is to lose weight, this is where you might decide how often you’ll work out each week. If you’re saving for retirement, you might identify how much you want to save and how you’ll invest.


  • Coping planning. This is where you try to anticipate the obstacles you might face while carrying out your action steps, and make subsidiary plans to deal with them so you can stay focused. It’s where you ask: What if things go wrong? What if you don’t want to exercise? Or what if you’d rather go to France than save for retirement, or the market falls and your plan hits the skids? It helps to create supporting plans, in advance, to avoid distraction and keep you focused on your action steps.

How effective is this kind of retirement planning structure? One study from the world of health research found that cardiac rehabilitation patients were better able to stick to exercise regimes as part of their treatment if they planned out action steps and developed coping plans. Could this be another area where health and wealth are intertwined?


Retirement Planning – What Can You Do Now?



1. Try to see retirement planning in the same light as other areas of your personal life

Do you take annual vacations to improve your mental well-being and family relationships? Do you walk several times a week to improve physical health? If so, try to think about retirement planning in a similar way. For example, in the same way you would plan a vacation or set a weight-loss goal, try to identify what you need to do to retire comfortably. Identify action steps like contributing to an employer sponsored retirement plan or an IRA. And schedule an annual check-up with a financial advisor.

2. Take small steps

Most people don’t suddenly decide to run a marathon on the day of the race. They generally do a lot of training first, building up their stamina and strength over time using a series of action steps. Building wealth can work the same way. Take small steps. Review your contributions to your retirement accounts, talk to a financial advisor about your goals and budget, total your expenses for the last year to see if they match your income, and determine if you have room to save more.

3. Make it easy

Once you have a plan, consider taking steps to help you cope with potential hurdles. Decide on an amount that you can afford to save from your paycheck. Then set up automatic deposits and investment plans. Again, if you need help, talk to an advisor. If you’re already retired and living off savings, visit an advisor annually to determine an appropriate annual spending rate — and stick with it. Ask your advisor to help set up automatic withdrawals from your savings based on your plan. And then live your life, updating your plan annually rather than daily.

4. Don’t wait to get started

You have to start somewhere. You can always find ways to exercise or save more in the future. Don’t let a modest beginning keep you from starting. Write out your goals and then talk with an advisor about how best to achieve them. If you want to build wealth, you’ll have to redirect some of the income you earn today to invest it to spend another day.  The rest is details.

How much are you spending? How much can you save? How are you investing?  If you have a detailed plan, that’s great. If you don’t, talk with an advisor and start one now.

Health and wealth interact in interesting ways. The benefits of developing and sticking with a plan — whether you’re exercising or saving money — are clear. And the research appears to suggest that health-promoting habits and good financial practices tend to reinforce one another.

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About LRPC’s Monday Morning Minute

Lawton Retirement Plan Consultants, LLC (LRPC’s) Monday Morning Minute is crafted to provide decision-maker’s with important information about the economy, investments and corporate retirement plans in a format that allows a reader to consume the information in less than 60 seconds. As an independent, objective investment adviser, LRPC has access to many sources of research and shares the best and most relevant information with its readers each week.

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to retirement plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at https://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.

Additional Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market or economic conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.