The New Rx for Retirement

Solving the equation to maximize retirement and health savings

Rising healthcare costs, uncertainty about the future of health insurance and increasing longevity present a formidable challenge for Americans preparing for retirement. But the advice from financial professionals remains simple — people must save more money today. For many Americans struggling to maintain even their current savings rates, that message can be deflating.

The strategic use of health savings accounts (HSAs) could offer a solution. One of the much-touted benefits of HSAs is the fact that savers can use the account to pay for their current out-of-pocket healthcare expenses. Yet simply using up the funds as you go means the HSA is never able to deliver its full potential benefit. This approach is akin to putting a high-speed train on a mile-long track. We have developed a savings optimization model that can help keep the train rolling at high speed until it reaches the end of the line, when the funds are needed in retirement.

Key findings

• HSAs offer a combination of flexibility and tax benefits that no other workplace savings option can match.
• Offering employees a savings optimization model can demonstrate the value of incorporating an HSA into their savings plans.
• It’s critical that employers pair guidance about employees’ HSA contribution strategy with the ability to take action seamlessly.

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