Rising medical costs are driving a significant share of American workers to scale back retirement contributions and other workplace benefits, according to new research from LIMRA.
LIMRA's 2026 Benefits and Employee Attitude Tracker (BEAT) Study, which surveyed 4,052 U.S. employees in January, found that more than three-quarters of workers reported a rise in their medical insurance premiums this year, with some facing increases exceeding 10%.
Half of those workers responded by tightening in other areas, LIMRA said, including those who cut spending on other benefits (16%) and reduced contributions to their retirement accounts (12%), according to LIMRA's BEAT Study.
"It is concerning that some workers, especially Gen Z, are reducing their 401(k) contributions due to rising medical insurance premiums," said Kimberly Landry, research director at LIMRA.
Landry cited the example of a Gen Z worker earning $50,000 annually and contributed 5% of that toward retirement. Reducing that rate by just 1%, she said, would translate to $500 less in savings yearly, which would be at least $20,000 less at the end of a 40-year career. Consider the potential for employer matches, salary growth, and investment returns, she said, and the opportunity cost becomes that much more expensive.
According to LIMRA, nearly three-quarters of Gen Z workers took some form of action when their medical premiums increased, the highest rate of any age cohort. The study identified Gen Z as the most likely group to reduce overall benefit spending.
A separate study by Allianz Life last year found 51% of Americans had either stopped or reduced their retirement savings in the past six months due to the current economic environment, with Gen Z (62%) and Millennials (62%) far more likely than Gen X (46%) or Boomers (36%) to report doing so.
That same study found that 59% of Americans are prioritizing saving for healthcare expenses over other financial goals due to anticipated premium hikes.
Beyond retirement savings, the LIMRA study found that a majority of households would struggle to cover living expenses within several months if they lost a breadwinner's income, while only 45% of employees said they could pay an unexpected medical bill of $2,000 – underscoring the critical role of disability insurance, life insurance, and supplemental health coverage.
The Employee Benefit Research Institute's recent Consumer Engagement in Health Care Survey, conducted in partnership with Greenwald Research, found four in 10 privately insured adults reported higher healthcare expenses over the past year. Among those facing higher costs, more than half cut discretionary spending, about one-third had difficulty paying other bills, and one-quarter were forced to reduce their retirement contributions.
"When higher health care costs lead people to cut spending, struggle with bills, or reduce retirement contributions, it highlights how affordability shapes both access to care and longer-term financial security," said Paul Fronstin, director of health benefits research at EBRI.
One of the more nuanced findings from the LIMRA research involves worker satisfaction. Overall satisfaction with benefits has risen year-over-year, with 45% of workers now describing themselves as very satisfied. LIMRA attributes part of this shift to "job-hugging," where workers in a cooling labor market view their existing benefits more favorably because they feel less able or inclined to leave for greener pastures.
That creates a hidden risk, LIMRA said, as employers might be significantly overestimating just how much their benefit offerings actually meet workers' needs.
"When employers misjudge the success of their benefits programs, they’ll be less motivated to make enhancements,” Landry said. “This puts them at risk of losing talent to competitors with more comprehensive offerings."
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