There are millions of employees across the country who simultaneously contribute to health insurance and 401(k) plans by way of weekly deductions from their pay. Most are allowed to decide, at least to some extent, how much they want to contribute. Knowing that, what do you think the average millennial employee would contribute more to?
A recent survey from TD Bank may shed some light on the question. The survey did not directly address health insurance versus 401(k) plans, but it did seek to find out what millennials spend their money on outside of paying the bills. It turns out that 54% spend with better health being the top priority. Some 39% make saving over spending a priority.
The survey also indicated that millennials are less likely to seek outside advice about health and nutrition matters and more when it comes to financial matters. Now, let us extrapolate the data and apply it to health insurance and 401(k) contributions.
Choosing a Health Insurance Plan
Workers obviously cannot control the cost of the plan they choose. Premiums are set by insurance companies. And yet, many employees do have at least some say in how much they pay. For example, they can choose individual insurance for themselves or choose a more expensive family policy.
It is not unheard of for employers to offer multiple policies with varying deductibles and monthly premiums. This suggests that workers could have three or four health plans to choose from. So there is some flexibility in most cases.
The interesting thing about health insurance is the recent change in the national mentality. We have reached a point in our culture where many people believe health insurance is a right. Along with that, it is now fairly normal for workers to dread the mere thought of existing without health insurance. The Affordable Care Act and its individual mandate have not helped. All of this combines to create a line of thinking that says health insurance is not optional.
Investing in a 401(k) Plan
Investing in retirement is an entirely different proposition. Not only are there no federal mandates forcing people to save, but our Social Security system has also created a false sense of security in the minds of a lot of people who simply fail to save because they believe the system will take care of them. If workers have to choose between a gold-plated health insurance plan and saving for retirement, they will view a 401(k) plan as a luxury rather than a necessity. Therein lies the rub.
Retirement is a future endeavor. It is way off in the future in the minds of a lot of people. On the other hand, well-child visits are here and now. Kids break bones and get sick. And, of course, parents have their own health issues to worry about. Where a 401(k) is easy to dismiss in hopes of getting to it later, health insurance is very much a requirement in the moment.
Employees Can Have Both
BenefitMall, a Dallas-based payroll provider, says that employees can have both under the right circumstances. Health insurance may still require a bigger piece of the withholding pie, but employers can offer a very good 401(k) plan that makes saving for retirement more affordable. BenefitMall offers one such plan thanks to a partnership with a well-known financial services company.
From a payroll perspective, health insurance and 401(k) plans are equally important. From the employee’s perspective though, that may not be the case. Retirement saving may have to wait so the family can afford health insurance in the moment.