401(k)s, HSAs and why your payroll deductions will keep you working to age 70 and beyond

Some of us delight in accusing politicians of being shortsighted and failing to consider the long-term consequences of their actions or inaction. However, upon further reflection it seems to me that employers are running a very close second.

The disappearance of the defined benefit pension has caused more and more Americans to be on their own saving for retirement. Even before this trend, it was known that Americans were not great savers, especially for things far in the further such as retirement. That didn’t matter as employers were determined to cut long-term liabilities and embraced the defined contribution pension in the form of 401(k) plans. Today we are amazed at the low retirement account balances of many boomers nearing retirement and we worry about not only the savings rate, but their investment choices along with the ability to make the funds last over a multi-decade retirement.

Leveraging this success, employers concluded that the defined contribution approach was also appropriate for health care benefits and so we have a rush to consumer driven health care, high deductible plans and health savings accounts (HSA). Now workers not only are asked to fund most or all their retirement, but also an increasing portion of medical expenses and to accumulate funds for future medical costs in retirement. We have created a thriving business for companies taking payroll deductions. The secret behind consumer driven health care is that individuals have less money to consume with, be it the health plan’s money or their own.

Soon early retiree medical coverage will not be an issue as retirement before age 70 will be non-existent. Hey, perhaps there is a method to this madness as long as employers don’t mind a cadre of seniors on the payroll.

I’m trying to set priorities. Do I save for retirement first or health care expenses? Should I also purchase long-term care insurance to protect my assets? No, protecting assets is not an issue, you must have assets after all and I’m trying to decide if I put mine into retirement or my HSA.

My personal feelings notwithstanding, this wellness stuff may not be a bad idea. Knowing the status of my health will help me make the best decision whether to put my money into a retirement or health care account. If I’m lucky the wellness program will help me keep working forever. Isn’t that what employers want?

I’ve considered one other scenario. I call it the eat now or later diet. If I diligently save for the future I get to eat later and lose considerable weight today. If I choose to eat today I get to lose considerable weight during what may be left of my poverty-stricken retirement years. It’s a complicated choice as you must figure in all those early bird specials and senior discounts.

My government promises me more and more it can’t pay for and my employer takes away more and more it doesn’t want to pay for. This consumer is being driven… nuts.

One comment

  1. Most employers want their cake an eat it.

    They do not really want to fund retirement plans and they do not want highly paid older employees on the payroll.


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