Employees Scale Back Retirement Savings To Ease Health Care Costs

Employees are concerned about the effect greater benefit costs will have on their retirement savings, a survey found.

According to the report on results of the survey sponsored by Ameriprise Financial, 82% of workers said they were at least “somewhat concerned” about how the costs of health care and health care coverage will affect their saving for retirement, and 18% said they were “very concerned.

Sixty-eight percent of workers said they are bearing more of the weight of their health expenses, down slightly from the 71% that reported doing so in 2004 and 69% in 2003. To combat these increases, most survey respondents (61%) said they cut their discretionary spending and over a third (37%) said they may switch to a less expensive health plan, the report said.

According to the survey results, 46% of workers said they plan to or have reduced the amount they contribute to retirement savings, up from 40% in 2004 and 38% in 2003. Twenty-two percent of workers said they will cut back on other benefits they chose to pay for, compared with 27% in 2004 and 24% in 2003, and 18% of employees said they may switch to a spouse’s health plan that costs less.

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Decreases in retirement savings indicated by survey responses included:

  • a modest 1 to 2% reduction – 54%,
  • a 3% to 4% cutback – 17%, and
  • a reduction of 5% or more – 29%.

Seventy-two percent of workers said they would be interested in attending a work place financial seminar to better understand and address rising health care costs, compared to 28% who said they would not. Following health care, other employer-sponsored benefits that have seen a rise in out-of-pocket expenses include dental care, life insurance and retirement plans.