Americans feel their finances are out of control, and for many, healthcare costs add to that stress, according to research from Bank of America Merrill Lynch.
In fact, 75 percent of people indicated there are not financially secure, and alongside this, 69 percent reported experiencing an increase in healthcare costs over the past two years, according to the research.
This data is based on a national sample of 1,227 employees with 401(k) plans administered by Bank of America Merrill Lynch in 2015, and it includes a cross section of employees from companies of all sizes and across life stages.
In this sample, Bank of America Merrill Lynch found financial wellness in terms of healthcare costs has decreased significantly since 2013, when almost half (48 percent) of Americans said they were always able to pay for healthcare costs. By 2015, this dropped to 38 percent, according to the report.
In response to rising medical costs, roughly 46 percent of employees have either started or increased their use of health savings accounts, according to the report. However, the majority of people are using their HSAs to cover short-term health expenses, rather than putting these savings away for medical costs in retirement. By the end of each year, more than half of Americans with HSAs have spent their entire balance, according to the report.
Part of the struggle is managing competing priorities, like debt. The survey indicated approximately three in 10 Americans (and four in 10 Millennials) have an unmanageable amount of debt.
The good news is more people felt they were saving enough for retirement compared to 2013 — this increased to 19 percent of respondents from 15 percent. However, the bad news is people may be looking at their nest eggs with a bit too much optimism.
As many as four in 10 respondents thought less than $500,000 would be sufficient for retirement and did not account for the costs of healthcare, according to the report. The other six in 10 respondents felt less than $1 million should be sufficient for retirement.
However, according to Bank of America Merrill Lynch both of these estimates could be low. For a couple who retires at age 65, healthcare costs in retirement are projected to cost as much as $400,000. Meanwhile, $1 million in retirement savings would only produce $40,000 per year, based on assumptions of future inflation and a sustained spending rate of 4 percent.
Knowing that may not help alleviate financial stress, but it can be a step in the right direction. According to the survey, those who felt most secure in their finances were those who spent time planning and crafting a retirement strategy.
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