HSAs Gain Strength As Crucial Retirement Planning Tool

Posted by on in Healthcare Consumerism

Several studies have emerged highlighting that many Americans are in danger of facing financial shortfalls during their retirement years. From not saving enough to dipping into the retirement accounts during periods of hardship, a large number of workers from all age groups and demographics are likely to enter their golden years without a sufficient savings. Although many people may have accrued enough savings to meet their basic needs, health costs - which tend to rise during one's retirement years - remain a core concern for most adults. In an effort to shield their traditional savings from burdensome health costs, many workers who are currently enrolled in a high-deductible health insurance plan are relying on health savings accounts (HSAs) as a retirement planning tool

A 2012 MarketWatch analysis found that most retirees will spend an average $250,000 in out-of-pocket health costs during their retirement years, an amount that can quickly cut into their nest egg savings and make it challenging to meet their medical needs. The flexibility of HSAs and the tax advantages they offer may afford many workers the ability to contribute to their future health needs over their working careers and amass enough wealth to help chip away at their out-of-pocket expenditures. This may be particularly important when workers begin paying Medicare premiums, which are likely to rise when retirees are required to take minimum distributions from tax-advantaged retirement accounts, according to Investment News.

The rise of HSAs
Required minimum distributions from tax-qualified retirement plans, pensions and Social Security can trigger an increase in income that results in permanent Medicare premium hikes. As HSAs are tax-free income sources when distributions are used to cover qualified medical expenses, the use of them may help workers cover their costs and premium payments.

An HSA is one of the best vehicles that you could possibly have to offset your healthcare costs in retirement. A growing number of companies are recognizing the importance and unique benefits of HSAs in helping workers not only account for their short-term medical costs, but also future expenses that may arise during employees' post-working years. As more adults implement integrated retirement planning strategies that take their potential future health needs into account, it's likely that HSAs will remain popular with workers as they plan for their golden years.

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Guest Tuesday, 25 November 2014