If you participate in health savings accounts, then you likely think more about retirement. Analysis from Fidelity Investments claims 401(k) participants with an HSA accrued more than twice as much in their 401(k)s as the average participant.
Here's the proof: At the end of 2010, Fidelity's average 401(k) balance was $71,500, but for those participants also contributing to an HSA, the average balance was $170,500, a whopping difference of 138 percent.
“HSA participants understand the tax benefits offered over the long haul, so it's not surprising they are some of the most active savers in tax-advantaged retirement accounts too,” says William Applegate, vice president of Fidelity. “As more employers turn to high deductible health plans to help rein in escalating health insurance costs, they're also seeking ways to help employees save for future qualified medical expenses. An HSA, like a 401(k), is a benefit that employers can offer workers to help create a culture of saving in the workplace.”
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Fidelity's research uncovered larger average 401(k) balances across all compensation levels of HSA contributors. For example, at the end of 2010, the average 401(k) balance for a participant earning $20,000-$40,000 per year was $19,000. For the same time period, the average 401(k) balance for a participant making HSA contributions was $30,000, 59 percent greater. At the higher compensation level of $100,000-$150,000, the average 401(k) balance at year end 2010 was $159,000. For a participant also making HSA contributions, that average balance was $260,000, 64 percent greater.
On average, HSA participants defer 8.9 percent of their annual salaries to their 401(k) accounts, versus the overall average 401(k) deferral rate of 8.2 percent. More HSA participants increased their 401(k) deferrals than decreased them during their first year in the tax-deferred savings account (19.7 percent vs. 15.4 percent respectively).
The trend of HSA participants increasing their 401(k) deferrals more than decreasing them matches what Fidelity has seen in its overall 401(k) population for eight-straight quarters. And for those HSA participants that decreased their 401(k) deferral in their first year in an HSA, more than 25 percent ended up increasing their deferrals in the subsequent year.
In March, Fidelity reported that a quarter of HSA account holders spend less than 10 percent of their annual contributions, allowing the balance to be carried over for future qualified medical expenses. The average annual 401(k) deferral for these active savers is 11 percent, nearly 3 percentage points higher than the overall average 401(k) deferral rate. In addition, while the vast majority of HSA contributions default into cash, this more diligent saving population invests 23.1 percent of their assets in non-cash investments, greater than the 15.1 percent invested by the average HSA contributor.
The number of HSAs grew 27 percent in 2010 for a total of 6.2 million accounts nationwide. Fidelity's HSA business grew 52 percent in 2010.
As plan sponsors look for ways to encourage HSA participation, many provide an employer contribution as an employee benefit, similar to those made to 401(k) plans. Of Fidelity 401(k) plans, 79 percent provide some level of employer contribution to a participant's retirement account. Of Fidelity plan sponsors offering HSAs, 83 percent provide some level of employer contribution to a participant's HSA account.
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