Despite concerns over current and future health care costs, many younger adults are not taking advantage of immediate opportunities to help plan for their financial future, a new survey reveals.
Nationwide Retirement Institute’s “Health Care Costs in Retirement Consumer Survey” finds that health care expenses can impact people so greatly that it has caused them to take “risky” actions to save on health care costs. According to the report, one in five (20%) younger adults report that health care expenses have caused them to:
- skip getting care (48%);
- go into debt (38%);
- stop saving for discretionary purchases (43%);
- not contribute as much as they would like to their 401(k) account (31%); or
- file for bankruptcy (13%).
What’s more, the number one financial concern of younger adults is not having the money to cover unplanned medical expenses. More than one in four respondents (28%) admit they would not be able to afford a $7,500 out-of-pocket health expense. And when asked about sources used to cover the cost, nearly one in five (18%) indicated they would tap their 401(k) or similar retirement plan, while 30% indicated they would use a credit card.
Meanwhile, nearly 70% agree that prioritizing self-care and mental health will help them save on future health care expenses and would like to do more to prioritize their health. Yet one in three younger adults admit that health and wellness are not top priorities for them. What’s more, half of younger adult respondents say that 10 to 15 years from now they will wish they had taken better care of their health.
Opportunities Await
“The financial barriers to affording health care can be overwhelming; however, many adults don’t realize there are a number of ways to lessen the financial burden,” says John Carter, president of Nationwide Retirement Plans and president and chief operating officer-elect of Nationwide Financial. Carter emphasizes that there are tools, employer programs and resources that can help consumers prioritize their health, remove cost barriers and best provide insight into how to address concerns. For example, Carter notes that taking advantage of an HSA, participating in employer programs or working with a financial advisor are relatively low-cost, easy actions consumers can take to help lessen the burden of health care costs in and out of retirement.
Yet, many younger adults are not having informed discussions with professionals on how to prepare. According to the study, only 22% of respondents reported that they had met with a financial advisor. “Health and wealth are highly personal and complex topics, and it’s easy to be overwhelmed when trying to prepare oneself for today and tomorrow,” Carter emphasizes. “Working with an advisor and taking advantage of online tools, in preparation for retirement, can help adults both young and old reach personal goals and achieve the retirement they envisioned.”
HSA Benefits
One hurdle to overcome with HSAs, however, is that both younger and older adults lack understanding of the advantages they can provide from a tax perspective and as a retirement savings tool. The study found that only 17% of younger adults use an HSA, and of those who have one, 25% use it to pay only for today’s health care expenses (rather than saving those funds as a tax-free way to cover health care costs in retirement).
Additionally, more than half of all people are not aware contributions made to an HSA are tax deductible or that money in an HSA can grow tax deferred. This knowledge gap could be an indicator of why people are not taking advantage of them, the study observes. “There is a clear opportunity for further education around and greater adoption of HSAs among younger and older adults,” says Kristi Rodriguez, leader of the Nationwide Retirement Institute, in noting that HSAs are an effective tool for supplementing retirement savings, while also offering tax benefits.
And many others agree with this recommendation. Findings from the Plan Sponsor Council of America’s recent survey on HSA design and use show that 60% of plan sponsor respondents agree that employee education remains the dominant concern of plan sponsors.
Nationwide’s findings were gathered from a survey conducted online by Edelman Intelligence from July 9-13, 2019, among 1,000 U.S. adults ages 25 to 45.
Nationwide also released the results of a survey that focused on “older adults.” Look for a follow-up post highlighting those results on Monday.
