Why your company’s retirement plan strategy should include HSAs

August 31, 2023
a woman sits at a computer at a conference table with other coworkers

Including a health savings account (HSA) option to complement your high-deductible health plan (HDHP) in your benefits package offerings is a game changer for your employees’ retirement planning.

It’s well-known that healthy employees are better engaged and more productive at work, and their overall health includes their financial well-being too. When employees feel like their financial goals are within reach, they feel appreciated, which shows in their performance — and that sense of appreciation leads to employment longevity and loyalty. HSAs can simultaneously help employees prepare for unexpected health emergencies and their retirement.

In fact, the Society for HR Management (SHRM) conducted a 2019 study revealing that 25% of HSA participants save money in an HSA to prepare for retirement. That number has grown in the years since that study was conducted.

The perks of HSAs

An HSA (Member FDIC) offers employees the flexibility to withdraw funds for eligible medical, dental, and vision expenses as needs arise. HSA contributions made via payroll deduction are not subject to tax, and withdrawals for eligible medical expenses are also tax-free, giving the employee double tax benefits. They can achieve triple tax benefits by investing the money in an investment HSA* account and letting it grow tax-free as well. The funds deposited into an HSA account carry over from year to year and are portable too.

So how exactly does an HSA help your employees prepare for retirement? Well, because HSAs don’t have use-it-or-lose-it strings attached to them, if someone is relatively healthy, the tax-free funds held in the account can feasibly be carried into retirement to be used for the medical expenses associated with growing older. In fact, according to studies, an average retired couple will incur close to $300,000 in medical expenses in retirement! Having that HSA nest egg will help employees and their spouses quite a bit during their golden years.

If an employee is relatively healthy now, having weekly or biweekly contributions made now could result in substantial funds in the account by retirement time — especially if it’s invested within an investment HSA.* For this reason, it’s beneficial to educate young hires on the value of not only putting as much as they can into their 401(k), but also making regular contributions to their HSA. A terrific way to educate them is by explaining that it lowers their taxable income, so they keep more and pay less to Uncle Sam every year.

Once an employee reaches the average retirement age of 65, the advantages of an HSA become even more beneficial. At this point, there is no longer a 20% penalty for ineligible expenses. Ineligible expenses are subject to taxes, however.

A trusted partner

UBT’s Omnify team makes accessing HSAs easy and user-friendly. Participants can use their benefits debit card or VISA® debit card, pay bills via the built-in online BillPay system, and reimburse themselves for out-of-pocket healthcare expenses. While the Omnify team cannot provide investment advice, they encourage participants to study how HSAs can provide peace of mind and financial confidence as they navigate life’s many chapters.

Interested in learning more about how to maximize your benefit offerings? The Omnify team is here to help — simply email us or give us a call at 844.472.6567.

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