A recent study by Alight Solutions has laid out the connections between healthcare, 401ks, and the HSA. We broke out these relationships even further to outline the savings impact on age, gender, income and healthcare dependents.
HSAs and 401(k)s Work Together to Maximize Savings
We will review the findings for you to help outline how to save the most and what increases savings the most for individuals. You are going to need to read all the way to the bottom to see the results.
Data Set: 1 million people at 34 large employers with January 1, 2017 enrollment dates
401k & Healthcare
- 401k and healthcare participation is based on income and age. Gender is not a factor. The older you are and the more you earn, the more likely you are to enroll (and contribute) to your 401k and healthcare plan.
- HSA participation is also based on age and income, but age skews in the opposite direction. Similar to a 401k, the more income you earn the more likely you are to enroll and contribute to an HSA.
- However, younger employees are more likely to contribute to an HSA. In fact, millennials are the highest HSA participants in this study!
HSA and 401k
- HSA and 401k participation follow similar trends to 401k and health care enrollment. Higher incomes continue to increase participation. But, older employees are more likely to contribute to an HSA and 401k. This is likely due to the fact that more employees, in general, contribute to a 401k.
- Gender is also a factor. Women are more likely than men to contribute to an HSA and 401k (anyone surprised?)
- Families are more likely to contribute to an HSA (individuals with dependents) In fact, this group is more likely to contribute to an HSA vs. a 401k, likely due to the financial pressures of higher out-of-pocket medical costs.
The Savings Multiplier
The most interesting results from this study are that employees who are eligible to contribute to HSAs and 401(k)s save more in total than employees who have just one of these accounts. This “ultra-savings” group understands the power of combining both the HSA and 401k to save the most tax-free dollars. It also means that the 401k and HSA do not cannibalize funds from each other. In fact, the data suggests they have a strong positive savings correlation with one another.
While many of the results are intuitive, these results do show the impact healthcare costs have on savings. Families are required to add more to their HSA vs. 401k to pay for the ever-increasing out-of-pocket medical expenses. The good news is, low-cost health groups, like younger individuals, are saving more in their HSA than their co-workers today. Their hard work now will set up dedicated health savings they need in years to come.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.