Retirement, college, and health savings activity expanding in U.S.

Employees under the age of 25 are taking proactive steps toward saving for retirement, according to an annual trends report from Ascensus. In the report, Inside America’s Savings Plans, Ascensus analyzed data across over 47,000 retirement plans, nearly four million 529 college savings accounts, and over 200,000 HSAs for which it provides recordkeeping and administrative services. The firm also highlighted HSA industry data from partner, and reported the following results:

Young employees starting early.

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 401(k) account balances of savers ages 25-34 nearly double that of their under 25 cohorts. Employees ages 25-34 represent the largest percentage of retirement savers on the Ascensus retirement platform, at just over 26%. This suggests that over one quarter of retirement savers recognize the importance of starting to save early.
Ascensus says that HSA owners under age 25 and ages 25-34 represented 20% of all HSAs on the its platform in 2016.

401(k) balances probably too low for retirement goals.

According to the U.S. Bureau of Labor Statistics, the mean American income in 2016 equaled $49,630 (National, State, Metropolitan, and Nonmetropolitan Area Occupational Employment and Wage Estimates, May 2016, U.S. Bureau of Labor Statistics.) Savers nearing retirement at ages 45-54 in this compensation range had just over $25,000 saved as of 2016 year end.

529 balances would only partially fund post-secondary expenses.

According to The College Board, the average annual cost of an in-state, public four-year university during the 2016-2017 academic year was just over $20,000; the average annual cost of a nonprofit, private four-year university was over $45,000 (Average Published Undergraduate Charges by Sector, 2016-17, The College Board, Annual Survey of Colleges).
529 account owners on the Ascensus platform had an overall average of just $22,000 saved. However, this average has increased year over year for account owners of all age segments, suggesting that more families appreciate the importance of saving early and often. In addition, every dollar saved in a 529 account is one less that the beneficiary or family will have to borrow to fund a post-secondary education. While the average 529 balance might not cover all college costs, these savings vehicles can serve to reduce student loan debt in the future.

Retiree healthcare expenses rise exponentially, HSA balances rise 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% chance of covering healthcare costs in retirement. As of 2016 year end, savers ages 65+ 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.

Value of making saving automatic.

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.
More employees are opting to establish payroll direct deposit into their 529 accounts, making small contributions with each payroll cycle. Employers are supporting this increased interest among employees, too. Ascensus has seen a 13 percent year-over-year increase in the number of employers making payroll direct deposits into 529 accounts.
Ascensus also reports that, 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% 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.

SOURCE: Ascensus press release, June 21, 2017.
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