Health Savings Accounts (HSA) plans are on the rise.
The number of assets in HSAs “rose steadily” to $30.3 billion, a 16.7 percent increase year over year. Current projections show it continuing and the HSA industry is on track to reach $50 billion in assets by 2018, according to new information shared by 401(k)-provider giant Ascensus.
The company identified key trends in how Americans save in an analysis of 40,000 retirement plans, 3.8 million 529 college savings accounts and 200,000 HSAs that it administers.
The number of HSAs, in particular, increased 22 percent in 2015, with 16.7 million open accounts, and are favored by savers at or near retirement.
Savers over age 55 account for 34 percent of the health savings assets on the Ascensus platform, suggesting that more savers are leveraging HSAs as a tool to increase overall retirement savings.
Additionally, savers over 65 are realizing the value of investing in HSA plans, with the highest average in health savings of over $3,400.
Specific to 401k and similar retirement plans, Ascensus found that automatic plan design features are driving higher enrollment rates. Plans 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.
Additionally, as automatic features become more prevalent, a majority of Millennials entering the workforce are enrolled in their employer’s HSA plan and begin saving earlier in their career.
“If they continue to proactively manage their savings strategy, this generation could be in a much better position to fund a comfortable retirement by the time they reach retirement age than those at retirement age today,” according to the company.
Lastly, Ascensus reported that online capabilities continue to gain traction and “promote smarter saving.”
Ninety percent of new clients onboarded in 2015 opted to enroll employees online. Additionally, online-based retirement calculators are still being used and promote better savings habits. Twenty-nine percent of participants who used the Ascensus online retirement calculator started saving immediately following its use at a nine percent deferral rate.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
