Participants Not Foregoing 401(k) Contributions for HSA Contributions

While the number of health savings account (HSA) holders on Fidelity’s platform increased 35% over the last year, a Fidelity analysis indicates that workers who contribute to their HSA are not doing so at the expense of their 401(k) contributions.

Individuals who contribute to both their HSA and their 401(k) contributed an average of 9.9% at the end of Q3, compared to a contribution rate of 8.5% for individuals who only contribute to their 401(k).

And that 8.5% average 401(k) contribution in the third quarter is the highest percentage in almost 10 years, according to Fidelity. More than one-in-four participants (29%) increased their contribution rates over the last year. Significant growth was seen among Gen X investors. Their average 401(k) balance increased 18% to $98,800 from last year.

Those higher contributions along with strong stock market performance increased the average 401(k) balance 10% over the last year. The average 401(k) balance rose to $99,900 from $90,800 in Q3 2016—a record level, according to Fidelity.

The Fidelity analysis also found an increasing percentage of workers are investing their 401(k) savings in target-date funds (TDFs), which can help individuals maintain the right allocation of stocks, bonds and cash. Nearly half of all workers (48%) hold all of their 401(k) savings in a TDF, up from 30% in 2012.

“Two of the most important aspects of a retirement savings strategy are how much an individual contributes and how they allocate their savings,” says Jeanne Thompson, senior vice president at Fidelity. “The increasing use of target-date funds, along with the increasing number of individuals contributing more to their retirement accounts, will help ensure people are saving at the right level and have a diversified mix of assets, which will put them on the right track to reach their retirement savings goals.”