Future of HSAS Is ‘Very Bright’
Health savings accounts present advisors with a great opportunity to help clients deal with health care costs during retirement.
Health savings accounts present a great opportunity to help clients deal with health care costs in retirement.
2018 MAY BE THE YEAR OF HEALTH SAVINGS accounts for advisors. Managing HSA accounts is “the direction the industry is moving,” says Peter Stahl, principal of Bedrock Business Results, speaking at a presentation at Schwab’s annual Impact conference. Now that medical expenses are a top retirement concern, HSAS are thrust into the spotlight, he adds.
“Health care costs are now the biggest issue for people,”
Stahl says. “The national average for medical expenses once someone reaches age 65 and is on Medicare is $6,772. HSAS really present advisors with a great opportunity to help clients deal with this problem.”
A number of planners are eyeing the opportunity to manage the investments in a client’s
HSA account, while researching which companies to work with and how much to charge.
Advisors should also con- sider working with compa- nies that offer HSA accounts to employees, Stahl says. That opportunity, he adds, “may be the rocket booster in 2018.”
BRIGHT FUTURE, TAX FREE
The tax-advantaged accounts allow users to save for health care costs their insurance doesn’t cover. Money is deposited tax-free, grows tax-free and can be withdrawn without paying taxes as long as the money is spent on health and medical expenses. However, HSAS can be used only by people who have qualifying high-deductible health insurance.
HSA accounts now have over $42 billion in assets, Stahl says, a 23% increase from a year ago. Nearly $7 billion in HSA accounts are invested, a 44% jump from a year earlier. The trajectory is likely to continue on a fast-track growth path, according to Stahl.
“The future is very bright for HSAS,” he says, noting that deductions and contributions are expected to increase and that the mandate for HSAS was set to be expanded in the Republican health care bill that narrowly failed to pass in the Senate earlier in 2017.
KEEP CLIENTS INFORMED
Advisors should urge clients to contribute the maximum amount to their HSAS and utilize the catch-up provision that allows individuals over 55 to contribute an extra $1,000 a year, Stahl recommends.
A tax-free 401(k) plan with an employer match should be funded first, Stahl suggests, but as soon as the match is met, clients should begin to fund their HSA.
Advisors may also want to suggest apps, such as HSA Coach, that can help clients track their medical expenses.