Using retirement programs to help navigate benefits cost pressures 

Around the world, governments and employers are facing aging populations and the potential pressures these pose to the cost of their health benefits. This creates a concern — if aging populations require more employer spending on health benefits to support them, will this eat into employers’ budgets for retirement spending?

A better approach, as we outline in our latest in-depth insight report The Longevity Dividend: The Business Case for Linking Health and Wealth, developed in collaboration with the World Economic Forum, is the goal to align health and retirement spending to complement one another and drive better outcomes.

This could help create a virtuous cycle that allows people to have longer, happier and more productive working lives, which in turn allows them more time and energy to prepare themselves for the retirement they want.

We believe health benefits and retirement benefits should not be viewed as competing claims on the same dollar. They are connected parts of the same employee experience. In fact, supporting employee health can help create the conditions that make retirement readiness possible.

By 2040, the number of people aged over 65 worldwide is expected to increase by roughly 53% compared with 2025, while the traditional working-age population is projected to grow by only 13%.¹ At the same time, each additional year spent in poor health could bring healthcare expenses, unplanned workforce exits, financial stress and lost productivity.

For employers, this matters because retirement preparation does not happen in isolation. It depends on employees being able to work, earn, save and avoid financial shocks over many years. Poor health can disrupt all of those things, but creating the conditions that facilitate good health could enable better outcomes.

We refer to this idea as the ‘longevity feedback loop’. Individuals in good health tend to have lower health costs and fewer workforce exits. That stability supports greater financial resilience, which may also give people more time and money to invest in their health. We believe the opposite is also true: poor health could increase costs and workforce exits, potentially driving financial instability and making it harder to maintain health.

The loop should reshape the way employers think about benefits. A healthier employee may be better able to stay engaged at work, maintain income, continue retirement contributions and make decisions about when and how to retire. Health benefits, in this sense, are the foundation of adequate retirement benefits, rather than an alternative to them. 

The report highlights how even relatively modest health interventions could create large economic returns.

In our view, the numbers are staggering: three low-tech actions — fall-proofing homes, increasing physical activity and expanding access to hearing aids — could save global healthcare systems more than $5.8 trillion and unlock another $645 billion in productivity by 2040.²

Increasing moderate physical activity by two hours a week could prevent more than 8.5 million new cases of type 2 diabetes by 2040, add 42 million healthy years of life and unlock more than $120 billion in productivity gains.²

Simple interventions like these to prevent chronic disease can reduce absenteeism, prolong careers and help older adults continue earning while reducing healthcare costs.

Similarly, fall-proofing homes could prevent 400 million falls worldwide by 2040, saving $5.4 trillion in healthcare costs and protecting both retirees and caregivers. Expanding hearing aid use, meanwhile, could help prevent 2.4 million dementia cases, saving more than $320 billion in healthcare costs and helping caregivers remain in the workforce.²

The connection between health and retirement is especially visible in caregiving. We found that a single year of caregiving, combined with the gender pay gap, can reduce a woman’s pension by an average of 24%.² A five-year caregiving break early in a career can reduce retirement income by 29%.²

That means a health event affecting one family member can become a retirement readiness issue for another. Caregiver leave, return-to-work pathways, contribution support and targeted financial planning are not just compassionate benefits, they are essential tools for protecting long-term savings.

None of this means employers can ignore cost pressures. Rising health costs require careful management, and retirement programs should be reviewed for efficiency, from fees and investment structures to governance models and vendor arrangements.

But the goal should not be to make healthcare and retirement fight for budget. It should be to make the total benefits package work harder.

A connected benefits strategy can help employees stay healthier, remain in the workforce longer by choice, sustain earnings, continue saving and enter retirement with greater confidence.

This is where employers have a critical leadership role to play. Designing benefits for the longevity economy means integrating support for physical health, financial wellbeing, caregiving and retirement into one more connected strategy.

That could mean creating clearer pathways back into work for employees who have stepped away to care for children, parents or other family members. It could also mean helping employees rebuild savings after career interruptions, rather than allowing temporary life events to become permanent retirement setbacks.

There is also a role for incentives and plan design. Employers can encourage longevity-friendly behaviors, from preventive care and healthy activity to reskilling and later-career development.

Retirement programs, meanwhile, can be reviewed for efficiency so that every dollar spent is working as hard as possible for both the employer and the employee. The answer to rising healthcare costs should not be to weaken retirement support. It should be to make the full benefits package more effective, more connected and more aligned with the realities of longer lives.

The opportunity is to create a virtuous circle in which better health could help support longer and more fulfilling working lives. Longer working lives support stronger retirement preparation, and stronger financial resilience gives employees more capacity to invest in their health. That is the longevity dividend employers can help deliver: not simply longer lives, but richer working lives and more secure retirements.

With health insurance premiums continuing to rise, now is the right moment to look at your total benefits budget with fresh eyes. The following practical steps can help employers evaluate opportunities to protect retirement program value while managing overall cost — without forcing a trade-off between health and wealth.

Take a total benefits view

Rather than managing medical, retirement, and other benefits in separate silos, consider how the full portfolio works together. When premiums rise, there may be opportunities to rebalance across programs — not just within medical.

• Review your 2026 benefits budget holistically: Where is spending concentrated, and where is there flexibility?
• Identify programs that deliver strong employee value at lower cost — these may absorb pressure from elsewhere in the budget.
• Model the employee experience end-to-end: Does your benefits package support both immediate health needs and long-term financial security?

A total benefit lens can help give you additional ways to manage cost while protecting the outcomes employees value most.

Identify retirement program efficiencies

Your defined contribution plan may already be doing a lot of the heavy lifting — but there's often room to make it work even harder, for both employees and the organization, without increasing what you spend.

• Benchmark plan fees and expenses: Are participants paying competitively priced investment management and recordkeeping fees? Excess costs can quietly erode retirement savings over time.
• Evaluate your recordkeeping arrangement: Regular market checks help ensure you're getting strong service and pricing — and can sometimes unlock meaningful savings.
• Assess investment menu quality: A well-constructed, streamlined fund lineup with a demographically appropriate qualified default investment alternative may help reduce participant confusion and potentially improve long-term savings outcomes at little or no additional employer cost.

Small improvements in plan efficiency can help create meaningful value over time, for participants and plan sponsors alike.

Reduce administrative burden

Managing a retirement plan requires significant time and expertise. For many organizations, streamlining governance and delegating certain responsibilities can help free internal teams to focus on higher-value priorities, while seeking to improve compliance and participant outcomes.

• Explore a pooled employer plan or 3(38) investment manager arrangement: Delegating investment selection and day-to-day plan operations to a qualified fiduciary can remove a time-intensive responsibility from internal teams and potentially reduce compliance risk and internal resource strain.
• Simplify committee governance: Clear, documented decision-making processes can help reduce meeting time and make it easier to demonstrate fiduciary prudence.

Trusted partners can help handle the complexity so your team can focus on the things that matter most.

We can help you take a connected view of your full benefits program and design a strategy that could help support your employees through every stage of their career.

Contact us to learn more.

_{¹ United Nations Department of Economic and Social Affairs. (2024). World population prospects. https://population.un.org/wpp/}

_{² Data based on research and analyses by the World Economic Forum and Marsh for The Longevity Dividend: The Business Case for Linking Health and Wealth. Insight Report. (June 2026).}