Sponsored by T. Rowe Price
- Health care expenses are the biggest line item in an employer's benefits budget—and they are also the most valued benefit to employees.
- While one of employees' biggest fears about retirement is not being able to afford quality health care, many fail to integrate health care planning into a holistic retirement savings strategy.
Historically, plan sponsors have largely kept health care concerns separate from retirement savings. But in 2017, 75% of plan sponsors said that Health Savings Accounts (HSAs) were part of their retirement benefits strategy.*
* Source: PSCA 2017 Health Savings Accounts and Retirement Plans.
*Consumer-directed health plan (CDHP). HSAs require the use of a high deductible health plan (HDHP), which is a specific type of CDHP.
Source: Mercer’s National Survey of Employer-Sponsored Health Plans.
We aim to provide advisors and their clients with a fair and balanced review of savings strategies, and an understanding that there is not a perfect solution. If done well, incorporating future health care costs in retirement planning can inspire confidence and help remove a major barrier to having peace of mind in retirement.
Reflects Roth and pretax employer-sponsored plans (as opposed to IRAs) unless noted. Advantages of account type (relative to the others) shown in blue. All three types grow tax-deferred. These are not the only options when it comes to saving for healthcare and/or medical related expenses in retirement. Note that while HSAs are structured for the individual to save or invest for health costs, this is not the intended primary purpose of a defined contribution plan or IRA. Individuals should evaluate their health coverage needs and other factors before seeking tax benefits of an HSA.
Source: IRS documents.
1Federal income taxes. State laws vary. HSA contributions through an employer may be excluded from FICA taxes.
2Subject to income limitations on participation (Roth IRA) or deductibility (traditional IRA). Amounts do not include catch-up contributions.
3Penalties end at age 65 for HSA and age 59 ½ for Roth and Pretax.
4Early distributions from retirement plans or IRAs may be subject to taxes and penalties unless an exemption applies. Distributions of contributed assets from a Roth IRA are tax- and penalty-free.
5Roth IRAs have no RMDs for original owner.
T. Rowe Price Investment Services, Inc.