How to save on health care costs, Nationwide Retirement Institute survey finds – Financial Planning

Welcome to Retirement Scan, our daily roundup of retirement news your clients may be talking about.

Younger clients take more risks to reduce health care costsNearly three in four younger adults have made risky moves to save for health care-related expenses, a survey by Nationwide Retirement Institute has found according to this Forbes article. These actions include deferring medical treatment, not getting appropriate care to avoid deductibles and avoiding a medical bill by skipping a scheduled appointment, the survey found. Younger adults are advised to make preventive care a priority and contribute to a health savings account to save taxes on their medical expenses.

Americans are saving more, and that isnt necessarily goodAlthough overall household saving has increased since 2007, clients continue setting aside cash many years after a downturn, contrary to what analysts expected, according to this article from Morningstar. Personal-saving rate climbed from 3.7% in 2007 to 6.5% in 2010, and it continued to increase an average 8.2% in the first seven months of 2019. That is evidence to suggest that something structural has changed, and its made the saving rate kind of sticky at higher levels, according to an economist.

1 in 3 Gen Xers made this costly mistakeNearly a third of all Gen Xers have borrowed from their 401(k)s, a survey by Schwab Retirement Services has found, according to this article in Motley Fool. Such a move is a poor decision to make, as taking a 401(k) loan comes with hidden costs, including a hefty 10% penalty if they are below the age 59. Their loan will be treated as a taxable distribution if they fail to repay the debt on time, and it will trigger a tax bill and can even raise their tax bracket.

3 times it makes sense for clients to borrow from their 401(k)s Clients are advised to only borrow from a 401(k) if they need to cover a down payment on their first home, pay off high-interest debt or are in a significant financial setback, according to this CNBC article. Before taking a 401(k) loan, clients are advised to factor in the penalties and fees, as well as determine whether they can afford to lose out on the tax-deferred growth of their savings. The loan will be considered a distribution and trigger an income tax bill and penalty if they leave their jobs and fail to repay the debt within a few months.