6 Trends Seen in America’s Retirement Plans

401k account balances growing, still fall short

401k, retirement, HSA, participants, millennialsAscensus released its annual survey.

Employer 401k matches and automatic features are a win for all involved. Anyone needing more evidence can find it in a new report that claims over 80 percent of retirement plan sponsors have opted to fund an employee match, up from 69 percent in 2015.

These plans are seeing participation rates 19 percent higher than those that don’t fund a match. Additionally, plans that offer both automatic enrollment and automatic increase features have an 80 percent participation rate.

It’s part of the findings from the annual trends survey released by recordkeeper and retirement plan provider-giant Ascensus on Wednesday, titled Inside America’s Savings Plans.

Ascensus analyzed data across its 47,000 retirement plans and 200,000 HSAs. The Pennsylvania-based company reports, among other things, that Millennials are beginning to outpace older generations in terms of saving, they really like HSAs, and 401ks still fall short of funding goals.

According to Ascensus:

  • Young employees are beginning to participate in their employer’s retirement plan early in their careers. Employees under age 25 represent just nine percent of savers on Ascensus’ platform. But data shows they are taking proactive steps to save as they advance in their career, with the average 401k account balances of savers ages 25 to 34 nearly double their under 25 cohorts. Employees ages 25 to 34 represent the largest percentage of retirement savers on the Ascensus retirement platform, at just over 26 percent. This suggests that over one-quarter of retirement savers recognize the importance of starting to save early.
  • Millennials are building a foundation of health savingsHealth savings account owners under age 25 and ages 25 to 34 represented 20 percent of all HSAs on the Ascensus platform in 2016.

Savers are making real progress toward their goals but are still facing an overall savings deficit.

  • 401k account balances across all generations are lower than will likely be required to cover retirement goals. According to the U.S. Bureau of Labor Statistics, the mean American income in 2016 equaled $49,630.1 Savers nearing retirement at ages 45 to 54 in this compensation range had
  • Health care expenses continue to rise exponentially for retirement-age Americans, while average HSA balances increase gradually. The Employee Benefit Research Institute estimates that a man would need $127,000 and a woman would need $143,000 saved by age 65 for a 90 percent chance of covering healthcare costs in retirement. As of 2016 year-end, savers ages 65-plus had an average HSA balance of just $3,618 as compared to $3,422 in 2015. However, these retirement-age savers likely have additional savings accounts, IRAs, and funding sources that they plan to use for future healthcare expenses.

Account owners and plan sponsors alike are seeing the value in making saving automatic.

  • Automatic features boost retirement plan participation, setting employees on the right track. Plans designed with automatic enrollment features see an average participation rate of 78 percent, nine percent higher than participation in plans without automatic enrollment. Plans that combine automatic enrollment and automatic increase have an average participation rate of 81 percent.
  • By pairing HSAs with high deductible health plans and enabling payroll direct deposit, employers are helping employees build a foundation of health savings. In 2016, 37 percent of HSA market growth was attributed to high-deductible health plans offered by employers. Additionally, 46 percent of all dollars contributed to an HSA came from an employer. By offering payroll direct deposit into the accounts, employers are helping employees make contributing to health savings a habit. The average employee contributed a total of $1,786 to an HSA in 2016.

“Americans are making progress as they save for life’s most important milestones and they are embracing the available investment tools of 401(k)s, 529 plans, and HSAs,” Bob Guillocheau, CEO and president of Ascensus, said in a statement. “We are thrilled to see the marked improvement across the board.”

  1. National, State, Metropolitan, and Nonmetropolitan Area Occupational Employment and Wage Estimates, May 2016, U.S. Bureau of Labor Statistics.

1 Comment on "6 Trends Seen in America’s Retirement Plans"

  1. Thanks for sharing these helpful insights, John. We’d like to add, when it comes to the rise of health care expenses, that considering Medicare Supplement Insurance as an additional safety net may help individuals safeguard their savings accounts. Also, we think that our readers will learn a lot from your post, so we included it in our Monthly Digest. You can read it here https://goo.gl/oW1ajD.

Leave a comment

Your email address will not be published.