Tale of two economies: 14% can’t pay medical bills, 401(k)s hit record highs

Call it a tale of two economies. Two new studies paint a contradictory picture of Americans’ personal finances.

One found that tens of millions of Americans can’t afford their medical bills, just as news dropped that 401(k), IRA and 403 (b) balances reached a record high last year.

The stock market is undeniably on fire. The major US stock market averages are near record highs and it shows in 401(k) accounts. Fidelity Investments reports the average balance in a Fidelity 401(k) topped $112,000 in the fourth quarter of 2019.

For workers who have saved in a 401(k) for 10 straight years, their average balance was $328,200. Last year, 33% of savers raised their contribution rates and a record 233,000 Fidelity customers are 401(k) millionaires.

There are other encouraging trends: More employers are offering managed retirement accounts to their workers, more of them are automatically enrolling new employees, and more of them are automatically raising their contributions every year.

For the investing class — including millions who save through their plans at work — the 10-year stock market rally has been a boon.

Yet millions of Americans do not invest in the stock market and overall participation in the stock market has not recovered to pre-Great Recession levels. Just more than half of Americans invest in the stock market either directly or indirectly, and stock ownership is concentrated at the very top. Federal Reserve data shows that only 2% of households in the bottom quarter of income own stocks.

That’s why health care costs are trouble for so many working families who don’t have the cushion for a medical surprise, high drug costs or a chronic illness. The Centers for Disease Control and Prevention found just over 14% of Americans in 2018 — tens of millions of people — could not afford their health care.

There had been some improvement in the years after the Affordable Care Act made coverage more available, but that progress has stalled. This new study found the distress over health care costs hurts the standard of living for the entire family, when rent is not paid and credit card bills pile up. The CDC found the rates are worse for the uninsured, but even Americans with health insurance are having trouble keeping up.

In short, stock market success is not a barometer for everyone. More likely, an improving labor market is the more common denominator for Americans. A new Gallup poll finds 61% of Americans say they are better off today than they were three years ago, and 62% give President Donald Trump credit for improvement in the economy.