The savings habits of Americans appear to be shifting in light of the challenging circumstances of the past few months. In addition to shoring up personal savings, there are indications that Americans are reforming their habits in other key areas like healthcare and retirement as they plan for an uncertain future. This newfound diligence represents an evolution of the approach that many had adopted in regard to savings and financial resilience. In response, financial services providers are producing innovative new tools for savers to steady their income amid the turbulence of 2020. Increasingly, these financial providers offer members of key affinity groups special products and services.
The evolution in savings practices comes at an opportune time; an unprecedented abundance of options means that many have a better ability to improve their savings habits. There is no shortage of data showing many Americans remain unable to handle a sudden, unexpected expense: a January 2020 survey showed that nearly 4 in 10 Americans were unprepared to cover an unexpected $1,000 expenditure, while a 2019 poll revealed that 74% of U.S. workers live paycheck to paycheck.
The good news is that tide may now be starting to turn. Newer data released this spring revealed that American savings account balances are at record highs. From healthcare savings accounts (HSAs) to income-generating retirement vehicles and high-yield savings accounts, individuals are more than ever appreciating the importance of a nest-egg, and companies are rolling out new options to meet customers where they are. One prominent industry example, Marcus by Goldman Sachs®, is offering AARP members a special rate on a no-fee, high-yield Online Savings Account and an exclusive 8-month term on a No-Penalty CD. Their No-Penalty CDs offer a fixed rate with the option to withdraw the full balance beginning 7 days from funding without a penalty.
Health savings accounts (HSAs) were created as a way to help consumers save and plan for health expenses. As increasing healthcare costs began to comprise a greater portion of the average household budget, it became necessary for consumers to prepare for unexpected medical expenses in a more flexible and tax advantageous way. Financial institutions quickly started to realize the potential of healthcare savings plans, and today research shows HSA growth remains strong with $73.5 billion in assets held in more than 29 million accounts.
“An HSA provides more than medical cost savings,” said Paul Leary, Head of Health Benefit Accounts at Optum Financial. “It’s a smart investment option that can help you build a financial plan and prepare for unexpected health costs. The money goes in tax-free, grows income tax-free and comes out income tax-free when you use it for qualified medical expenses. HSAs are portable and have no ‘Use it or Lose it’ rule, so these dollars can be accessed at any time.”
Optum Bank also offers an HSA product that’s exclusive to AARP members.
As the retirement savings industry has grown, the limitations of traditional offerings have become more apparent. Specifically, the decline of pensions and rise of 401(k)s has given Americans the opportunity to take a more active role in planning for the future. This has led to the increasing availability of guaranteed retirement income and guaranteed return products.
Providers such as Blueprint Income now offer annuities for those both approaching and in retirement. Special benefits, such as a free annual retirement income checkup, are available to AARP members. Customers capitalize on their existing savings for a guaranteed source of income later in life, providing a level of stability not offered by the market. As the retirement savings industry grows in size and complexity, guaranteed income solutions may become a staple for savers.
Personal savings have never been more important as Americans face the stark reality of a struggling economy. Demand for innovative savings products will continue to evolve as consumers strive to build short-term savings and fund retirement income for today’s longer lifespan.