Americans are underutilizing retirement savings options, Edward Jones found in a survey. Fifty-one percent are not actively contributing to a 401(k) plan, and only 37% are contributing to an individual retirement account (IRA) and 18% to a health savings account (HSA).
“While 401(k) participation has increased over the years, there continues to be opportunities for Americans to better utilize not only employer plans, but they may also be overlooking other popular retirement savings tools,” says Scott Thoma, principal and investment strategist for Edward Jones. “Individuals seem to understand the key risks they will face in retirement, so it is important to design a comprehensive strategy, considering all of these retirement savings vehicles, to ensure they can prepare for these risks.”
The survey also asked people what they consider to be the biggest threats they will face with respect to retirement income. Thirty-seven percent said health care costs, 22% said outliving their savings, and 15% pointed to inflation.
Asked what they expect to be the largest expense they will face in retirement, 51% said health care costs. This fear increases with household income, with only 37% of people living in a household with income of less than $35,000 expecting health care to be their biggest cost in retirement, whereas 55% of those living in a household with income between $50,000 and $75,000 expect health care to be their biggest expense, and 62% of those living in a household with income of $100,000 or more saying this.
Thoma said that health savings accounts can be a very valuable tool to help people mitigate these costs.
Asked about tax reform, 44% said it will impact their retirement savings strategy. For Millennials, 51% share this opinion, yet only 40% of Baby Boomers said so. Edward Jones said this seems to indicate that those further from retirement are more optimistic and amenable to making changes to their retirement savings strategy.
ORC International conducted the survey of 1,017 people for Edward Jones in early February.