With open enrollment in full swing, it’s time for your team to review their health insurance options. A common approach is to check the same box as last year, leaving your health insurance unchanged for another 12 months.
In making this quick decision, most employees aren’t aware of potentially missing out on a powerful retirement savings tool. Here's how HSA's and retirement savings go hand in hand.
Health Savings Accounts (HSAs) are a tax-advantaged way to set aside money for qualified medical expenses, and they’re also a great way to invest alongside your other retirement accounts. With HSA contribution limits raising next year now is a great time to consider their many benefits.
Here are 5 of the best reasons why HSAs & retirement readiness goes hand in hand.
Unlike a Flexible Spending Account (FSA), deposits you make to an HSA don’t have to be withdrawn and used by the end of the year. In other words, the use-it or lose-it rules don’t apply.
In fact, your employees can invest and grow the money in their HSA just as they would a 401k.
If you don’t incur a lot of out-of-pocket health care expenses throughout the year, your contributions can potentially grow for decades into the future. This helps employees plan for a significant, long-term expense that often gets overlooked when thinking about retirement.
With 3 separate tax advantages, HSAs offer the greatest potential for tax savings compared to 401ks, Roth IRAs, and just about every retirement savings option out there.
Here are 3 ways an HSA will reduce your tax bill:
The average couple is estimated to need $285,000 for medical expenses in retirement. That doesn’t even include inflation or the cost of long-term care.
With such a likely and significant expense to plan for, it makes sense to utilize the best savings option.
Thinking long-term with HSA dollars gives employees the future luxury of paying for expenses like prescriptions, office-visit copays, and long-term care with a tax-free pool of money.
It’s not only the tax benefits that make HSAs an attractive choice. The flexibility of these accounts goes unmatched compared to other retirement savings options.
Here are a few additional HSA advantages to know:
Planning for an early retirement comes with its own set of challenges, like dealing with the awkward “gap years” of health insurance coverage.
This is the period after leaving your employer’s health insurance plan, but before Medicare kicks in at age 65.
Purchasing individual coverage is the most common solution, but premiums can be shockingly expensive compared to your employer’s plan.
Here are some ways to plan for early retirement using an HSA:
. . .
All in all, It’s worth taking the time to educate employees on the benefits of HSAs, along with other important financial wellbeing topics. It nudges them to consider all available health insurance offerings, rather than haphazardly deciding on their lunch break, the day before open enrollment closes.
HSA accounts are only available to employees 18 years of age or older who are covered under a qualified High Deductible Health Plan (HDHP). Speak with a licensed professional to decide if a HDHP is right for you and your family.