According to Fidelity Investments, health savings accounts — and the assets within them — are rising quickly, as both employers and employees try to find ways to pay for health care. Still, a number of the features of HSAs are still underutilized.
While Fidelity says that assets in its HSAs rose 50 percent in the past year, now topping $2 billion, and the number of individual account holders rose 46 percent during the same period to 657,000, it points out more work still needs to be done on showing employees the advantages of such accounts.
Since it’s estimated that couples retiring today could need $260,000 — perhaps even more — to cover their health care costs during retirement, the need for a way to save just for health care expenses, aside from other retirement expenses, is becoming more urgent.
HSAs offer a tax-advantaged way to set aside more money than a retirement account alone provides — and people who have both tend to save more overall, with 2016 statistics indicating that people who had both defined contribution and HSA accounts saved on average 10.7 percent of their annual income in the retirement account. Those with just a DC account saved on average 8.2 percent in it.
People are mostly satisfied with HSAs — 80 percent say they are, while 76 percent are satisfied with the ease of using it HSA for medical expenses, 77 percent with the quality of their health care coverage and 77 percent with how the plan helps them manage their health care costs.
But that doesn’t mean they’ve got all the ins and outs figured out yet; 39 percent mistakenly believe that they’ll lose unspent HSA contributions at the end of the year. Yet unlike contributions to health flexible spending accounts (FSA), unspent contributions to HSAs roll over from year to year.
Still, employees are learning that HSAs can provide them a means of saving that’s not restricted to cash. While it’s still not common, more people are putting HSA money into investments that can then grow toward covering longer-term health expenses, but employers, says Fidelity, can do more to educate workers on such an option. Nationally, only 15 percent of all HSA assets are invested outside of cash.