Health Costs Eat Away at Retirement Contributions -- your money

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) October 28, 2006 -- More than a third of Americans squeezed by higher medical costs say they've reduced their contributions to retirement and other savings accounts in response.

Thirty-six percent of those who've seen their health costs climb in the last year report they've decreased their retirement savings compared with 25% who said so in 2004, according to a survey of 1,000 adults from the nonprofit, nonpartisan Employee Benefit Research Institute (EBRI). More than half -- 53% -- say they've ratcheted down other savings.

Paying for higher health costs resulted in other financial struggles more often as well, with 28% saying they had trouble paying for basic necessities this year vs. 18% in 2004. Difficulty covering other bills affected 37%, up from 30% two years ago.

Concern about rising costs is driving increasing dissatisfaction with the nation's health care, the survey found. Though premium-cost growth has slowed for three consecutive years, the rate is still no match for growth in wages and inflation, said Paul Fronstin, director of the health research and education program for EBRI.

Premiums for job-based health coverage rose 7.7% on average from 2005 to 2006, according to the Kaiser Family Foundation. Wages rose 3.8% and inflation increased 3.5%.

"As long as health-care costs are going up that fast, it's going to continue to have an impact on Americans," Fronstin said.

Cutting back on retirement savings is easier than skimping on current needs, he said.

"When something's got to go, it's something you have time to make up for," Fronstin said. "We've always known when workers rank their benefits, health care ranks much higher than retirement benefits and that's because people, when focusing on benefits, are focusing on what they need now rather than what they will need 20, 30, 40 years from now."

Some people may calculate that they can recoup the losses by restarting or raising their retirement contributions when they're earning more money, but catching up is far from guaranteed. "The risk is leaving money on the table when you're getting an employer match, and that's costly."

Author: Kristen Gerencher

Source: http://biz.yahoo.com/