Few Americans Preparing for Long-Term Health Care Savings

Only 41% of consumers surveyed understand what long-term health care expenses will be in retirement, and only one-third are confident they are saving at an appropriate rate to cover long-term health care needs.

The majority of health care consumers surveyed by Alegeus are under-funding their health care savings.

Though up 18% from last year, the degree of health care savings discipline scored just 25.9 on a 100-point scale, according to Alegeus’ 2017 Consumer Healthcare Savings Index. This compares to 29.8 for college savings, 41.5 for retirement savings and 41.6 for emergency fund savings.

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The index found consumers are starting to become more disciplined about saving for health care, although numbers are still low. Forty-one percent understand what long-term health care expenses will be in retirement, and 34% are confident they are saving at an appropriate rate to cover long-term health care needs.

Thirty-six percent have budgeted to make monthly contributions to their health care savings, and 32% have savings goals to cover long-term health care costs. Thirty percent report they are aggressively saving for long-term health care needs.

To help grow their savings, 29% invest their health care savings in stocks, bonds and/or mutual funds.

Alegeus says the index demonstrates progress in the way consumers manage health care spending and saving, but there is still a long way to go before true consumerism is realized. It “clearly signals the need for significant education, tools and support as consumers assume more financial responsibility for their health care costs.”

The survey included responses from more than 1,400 U.S. health care consumers. The full report may be downloaded from here.

Government Plan Sponsors Seek Employee Communication from Providers

A Lincoln Financial Group study found government employers want to see better technology, advanced plan designs and personalized service from providers. 

A recent study by Lincoln Financial Group revealed key changes plan sponsors working in the government sector are hoping to see from their service providers.  

The study, which surveyed 4,100 plan sponsors, reports employers are pressing for better technology, advanced plan designs and personalized service from providers, in order to raise participation among workers.

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Government plan sponsors want more focus on communication and increased participation rates, because ultimately they want to help their employees save for retirement,” says Gregg Holgate, head of institutional services at Lincoln Financial Group. “For providers, consultants and advisers, these are actionable insights that will help better serve the government market.”

While most government employers (53%) offer defined contribution (DC) plans to their employees, only slightly more than half (56%) of those plan sponsors believe they are successful in aiding a worker’s retirement savings. Furthermore, the study discovered participation rates in DC plans offered by a government employer are much lower compared to 401(k) plans, with only a 44% participation rate found in government plans compared to 82% in 401(k).

More specifically, across the board, participation and deferral rates fared far lower than in 401(k) and 403(b) plans. A participation rate of 38% and a deferral rate of 2% was found on the counties level; special tax authorities saw a 43% participation rate and a 3% deferral rate; and the federal/state level had a 42% participation rate and a 3% deferral rate; among others.

And although 93% of sponsors are dissatisfied with these low rates of participation among employees, according to the survey, another 93% of employers are unhappy with the service and communication received from plan providers. Fifty-percent of sponsors believe employee communication is the answer to meet retirement goals, according to the study, yet only 10% of consultants and 20% of providers emphasize communication. Seventy-five percent of consultants, along with 65% of providers were found to pay more attention to investments and administration. Only 14% of sponsors indicated investments and administration as a need to reach their goals in the survey.

Across the board, over 90% of all government levels consider one-on-one guidance and employee communication as most effective. These rates include 94% of employers on the counties level; 92% of federal/state plan sponsors; 95% of higher-education/public hospitals; 92% of cities; and more.

More information on the study can be found here.

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