HSA Ownership Boosts Confidence About Retirement Expenses

Those who have a health savings account are more certain about how they will cover future health care costs.

Asked what their top retirement concern is, 36% of adults over the age of 65 say it is health issues, according to Franklin Templeton’s eighth annual Retirement Income Strategies and Expectations survey. That is followed by running out of money (16%) and maintaining their lifestyle (12%). Among those of all ages, 51% of respondents say it is paying for health care, followed by paying off debt (16%) and maintaining their lifestyle (15%).

However, 75% of those who have a health savings account (HSA) say they know how they will pay for medical expenses in retirement, whereas only 36% of those who do not have an HSA say the same. Among all respondents, 48% say they do not know how they will pay for health care costs in retirement.

Sixty-eight percent of Americans prefer to measure their investments against their goals rather than a benchmark. For many, retirement savings is a top goal, but 66% of pre-retirees say they are behind on this goal. Only 46% have a strategy in place to generate retirement income that could last 30 years or more, but 66% say they would be willing to pay for insurance that would guarantee a stream of income throughout their lifetime or protect their assets from dropping below a certain threshold.

Forty-five percent are confident they know how much of their retirement income will come from Social Security. Only 33% work with a financial adviser, but 60% say financial advisers can help with retirement planning.

“In order to address the top retirement concerns so many Americans are facing, it’s imperative to incorporate health care expense planning as part of a holistic retirement savings strategy,” says Kevin Murphy, senior vice president, health of strategic accounts for Franklin Templeton’s U.S. defined contribution division. “Health savings accounts are a great example of one of the most efficient vehicles to save for medical expenses in retirement that can complement long-term retirement savings strategies. Educating individuals on the benefits of utilizing HSAs for retirement savings should be a key component of conversations between financial advisers and their clients.”

Seventy-five percent of respondents who have a high deductible health plan (HDHP) say they have an HSA. Currently, only 31% of employers have a HDHP, but more employers are moving in that direction, according to Franklin Templeton.

“While it’s important for individuals who do have access to an HA to understand the benefits and leverage them appropriately, the need to prepare for this large liability in retirement is critical to address regardless of access to this option,” Murphy says.

Franklin Templeton’s findings are based on an online survey of 2,002 adults conducted in January by Engine’s Online CARAVAN.