More than two-thirds of workers have seen an increase in their share of health-care costs, which, in turn, has had a ripple effect on worker spending and saving habits. Fifty-five percent say they are reducing discretionary spending, 24% are cutting back on workplace benefits they receive at additional costs – a move that includes reducing contributions to retirement plans – 12% are switching to a less-expensive health plan and 6% are dropping their healthcare coverage completely, according to an American Express Financial Advisors Inc study.
In fact, 37% of the 958 respondents are planning to decrease the amount allocated toward savings and investing overall. “We’re most concerned about employees making abrupt decisions to try and quickly fix their current financial situation, without taking into consideration the long-term impact to their retirement savings,” said Rusty Field, vice president, American Express Financial Education and Planning Services.
“We have found that a significant number of people are now considering reducing their retirement plan savings. We realize that having sufficient health care is vital for workers and their families, but their future retirement security is equally important. However, employees need to be well educated on the options they have to help them handle the increase in health care expenses without compromising their ability to save for the long-term.”
But unless the health-care cost situation improves, retirement contributions may continue to plummet. Nearly three out of 10 (29%) workers said a “significant increase” in the cost of health benefits would make them consider reducing their regular retirement plan contributions.
- 42% would make a 1% to 2% reduction as a percent of their salary currently being deducted.
- 21% would cut back 3% to 4%
- 22% would decrease their contribution percent more than 4%.
American Express says the survey results shows health care expense increases can have a measurable effect on respondents’ level of financial stress, with half of those surveyed indicating at least some or considerable increase in financial stress. To combat financial stress issues, the survey found that 70% of workers would be interested in attending a free financial seminar to help them understand and address rising health-care costs.