The ever-increasing cost of health care is not only hurting workers’ financial security in the present, it’s also making it harder to reach financial goals in the future.
Nearly 70 percent of workers surveyed have seen their health care costs increase over the past two years, according to the 2016 Workplace Benefits Report from Bank of America Merrill Lynch. The report finds that among those who have experienced rising health care costs, more than three quarters are saving less for retirement, and 23 percent are saving significantly less.
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It appears that many workers are redirecting their money toward health savings accounts, with 46 percent of respondents saying they’ve started contributing to or increased their contributions to such accounts. The percentage of employees participating in HSAs grew by almost 50 percent over the past two years.
While HSAs can be used as a retirement savings vehicle, more than half of workers who use one consider it a short-term fund to cover health care expenses now. Although HSAs can be rolled over year after year, 55 percent of workers usually spend their entire balance each year.
As they save less for retirement, workers’ financial anxiety is growing. Among those surveyed, 60 percent said they feel stressed about their financial futures, up from 50 percent in 2013.
They might be even more anxious if they know how much money they’ll really need in retirement. Four in 10 workers think that they’ll need less than $500,000 in assets at retirement.
Even a million dollar portfolio, however, would only generate $40,000 worth of annual income for a healthy couple retiring at 65. That may not cover expenses, since health care costs alone could cost that couple $400,000 over the course of their retirement.