SURVEY SAYS: Health and Retirement Compete for Employee Money

Last week, I asked NewsDash readers, “Have you ever reduced your retirement plan deferrals because an increase in health care benefit costs reduced your take-home pay?” I also asked if other employees in their company have done this.

More than half (57.7%) of responding readers work in a plan sponsor role. Nearly one-quarter (23.1%) are recordkeepers/TPAs/investment consultants, 15.4% are advisers/consultants and 3.8% are CPAs.

Three in 10 (30.8%) responding readers said they have at some time reduced their retirement plan deferrals because an increase in health care benefit costs reduced their take-home pay. Slightly more than 15% (15.4%) each reported that other employees in their companies have done the same and other employees have not done so. The remainder said they didn’t know whether other employees in their companies have at some time reduced their retirement plan deferrals because an increase in health care benefit costs reduced their take-home pay.

Few readers left comments, but the ones who did offered good food for thought. One said this is a good point to make during bargaining discussions. Another stated, “Health’s immediate needs win over future retirement goals.” Editor’s Choice goes to the reader who said: “You can cut the pie into many pieces, but it’s still only one pie.”

A big thank you to all who participated in our survey!

Verbatim

This is also a good discussion during bargaining discussions. We don’t survey any employees, but through the years employees have said they reduce 401(k) because of health care contribution increases.

You can cut the pie into many pieces, but it’s still only one pie.

The triple tax benefits of your HSA certainly make it attractive as a way to save long-term for health care expenses. If one can pay for immediate health care costs out of current income, there is no better long-term savings vehicle.

I am not on my current employer plan. Instead I am retired from another firm with an HRA, which requires we be on the marketplace for those under 65. In 2018, the monthly premium for my husband and I was over $2,100 per month for the bronze level plan. Last year, $1,800 and this hear $1,700. Thank goodness for the HRA paying a good portion of it, but we still needed to make some adjustments. Talk about panic mode in 2018!

I know people who I can’t convince to contribute to their 401(k) ‘because they don’t have enough money’, but the health care benefits are purchased. Health’s immediate needs win over future retirement goals.

I am only aware of one employee who reduced their retirement contribution due to increased health care costs. It wasn’t because the premiums increased or the plan design changed requiring higher deductible or copays. Instead, it was a situation where someone in her family received a diagnosis that required a high-priced drug.