401(k), HSA Balances Increased Through 2024

Buoyed by bigger employee contributions, both 401(k) and health savings account (HSA) balances were up significantly at the end of 2024, compared to year-end 2023.

The average 401(k) account balance at year-end 2024 was approximately $100,300, up 16% compared to the average $86,000 balance at year-end 2023, according to analysis from Bank of America. And the average HSA account balance at the end of 2024 was $5,000, up year-over-year from $4,400. 

The average 401(k) contribution rate was 6.6%, while 21% of participants increased their rate in the last quarter of the year, up from 9.7% of participants in the third quarter — a trend led by Millennials.

Meanwhile, employees also got more serious about their HSAs. This is a positive sign as industry experts tout the savings vehicle — with its triple-tax advantages —  as a smart way for employees to save for and pay medical bills as well as saving for their post-work years. In Q4, on average, Generation X employees contributed the most to their HSAs — nearly $2,000 — while Millennials were most likely to have saved their HSA funds.

While positive market forces likely helped grow participant balances, more plan participants increasing their contribution rates also helped swell accounts, said Lisa Margeson, managing director of retirement research and insights at Bank of America. “This data suggests more employees may be feeling confident about their ability to save for retirement,” she said.

Another positive sign out of the Bank of America report: Fewer participants borrowed from their 401(k) in Q4 (2.2% versus 2.5% in Q3).

Those findings are positive signs, especially given the fact that financial stress has continued to be problematic for workers due to stubborn inflation and high costs of living. Workers rated their concerns about their financial well-being 6.3 out of 10 in 2024, according to the 2024 Workplace Wellness Survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research.

According to a recent SHRM pulse survey of 1,071 U.S.-based workers, 43% of U.S. workers reported that inflation had an extreme or significant impact on their personal financial situation.

The higher savings in 401(k)s and HSAs may reflect that employees are growing more confident in their finances or that they recognize they need more money for their retirement and health care savings — data last year from Northwestern Mutual found that, on average, U.S. adults believe they will need $1.46 million to retire comfortably, a 15% jump over the $1.27 million reported in 2023 — or both.

How HR Can Help Improve Employees’ Financial Well-Being

Although employers should feel encouraged by larger account balances and increased contribution rates, Margeson said HR and benefits leaders should “continue to educate their employees about their workplace retirement savings options.”

While Margeson noted that savings goals are personal and different for each employee depending on numerous factors, there are a few things employers can do to put their employees on a path toward financial wellness in 2025. Her recommendations:

Focus on HSA education. “Improve employee understanding of HSAs by increasing communications and educational resources around their power,” Margeson said. The Bank of America Q4 data found that only 14% of HSA account holders are investing their funds for future potential growth, “meaning many employees are not taking full advantage of their HSA’s capabilities,” she said.

Consider smart 401(k) plan designs such as auto-enrollment. This can help employees start saving for retirement. “Auto-increase is a smart plan design that can help your employees steadily increase contributions without needing to manually update their rate each year,” she said. “Employers can also consider adding a 401(k) match, which will not only help encourage employees to participate in the plan but also help them reach their retirement savings goals faster.”

Offer financial wellness benefits. “Ensure you are offering financial wellness resources, including online financial tools, calculators, and scores to help employees measure and improve their overall financial well-being,” Margeson said.