HSAs to see explosive growth
It’s about time for health savings accounts to take the spotlight. And that’s going to be a good thing for employees, industry experts say: Not only will HSAs help workers with their healthcare expenses, but the savings vehicles also will put them on a better track for retirement planning.
“The market is going to blow up,” American Retirement Association CEO Brian Graff said during the NAPA 401k Summit in Las Vegas, citing new healthcare reform proposals, as well as a better understand of HSAs as reasons for the predicted growth.
By 2018, there will be 27 million HSA accounts and more than $50 billion in HSA assets, according to estimates from the Kaiser Family Foundation cited by Graff. Currently, there are 18 million accounts and $34.7 billion in assets.
Those statistics — and proposed healthcare reforms — are catching the eye of the retirement industry: The accounts have the potential to become “more compelling than a 401(k),” due to tax-deductible and tax-deferred incentives, Graff said.
“We have to think about what this means for our industry,” he said.
In a live poll during a conference keynote, three-quarters of retirement advisers noted they do not offer HSA advisory services. That number, Graff predicts, will change radically over the next two years.
Current proposals are positioning HSAs a hybrid of medical and retirement savings, Graff said. “It’s not just a health account, it’s a savings account.” Healthcare expenses are a major concern for retirees and often cause employees to push back plans for retirement. If HSA funds are not needed for medical expenses, the money can be withdrawn after age 65 and taxed as ordinary income.
Graff says plan sponsors and retirement advisers should encourage employees to first max out their HSAs and then match their 401(k)s.
The HSA is “the nexus between healthcare and retirement,” Daniel Bryant, an advisor with Sheridan Road, said during a standing-room only panel on HSAs Monday.
Meanwhile, added panelist Ryan Tiernan, a national accounts manager with American Funds, “it’s the biggest jump ball no one has cared to jump to. HSAs are probably the most efficient way to save and invest for your biggest expense in retirement.”