Planning for Retirement Health Care Costs

Using Health Savings Accounts

Planning for Retirement Health Care Costs

Using Health Savings Accounts

Health care costs are a significant concern for employers and employees. With proper preparation, planning for health care costs doesn't have to be overwhelming and can be addressed in a comprehensive retirement savings strategy.

Understanding the Differences in Health Care Savings Options

There are a number of tax-advantaged ways to save for health care expenses in retirement. We aim to provide financial professionals 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.

Understand the Differences in Health Care Savings Options

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 health care 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: HSAs are only available if you are covered by a high deductible health plan. IRS documents.

Federal income taxes. State laws vary. HSA contributions through an employer may be excluded from FICA taxes.
Subject to income limitations on participation (Roth IRA) or deductibility (Traditional IRA). Amounts do not include catch-up contributions.
Penalties end at age 65 for HSA and generally at age 59½ for Roth and Pretax. Distributions of contributed assets from Roth accounts are tax- and penalty-free.
Early distributions from retirement plans or IRAs may be subject to taxes and penalties unless an exemption applies.
Once you reach age 59½ with an account that has been opened for at least five years, you may qualify for tax-free withdrawals of both Roth contributions and any accumulated earnings.
By April 1 following the year you reach age 72 (70 1/2 if you were born before July 1, 1949) you must begin to withdraw a certain amount of money annually from your retirement account(s). If you are still working with the company that sponsors your plan, you may be allowed to delay your first RMD until the April 1 following the year in which you retire. For each year following the year you reach your RMD age (or retire, if later - as applicable) the deadline is December 31.
Roth IRAs have no RMDs for original owner.

For additional information, please reference T. Rowe Price's "How to Best Use Your Health Savings Account”.

Strategically Address Health Care With Clients

Differentiate your practice by helping clients prepare for future health care expenses as part of a broader discussion around retirement savings.

Financial Professional Presentation Handout

Health Care Financial Professional Handout

Employer Presentation Handout

Health Care Employer Handout
Realities of Health Care

Health Care is Not a Six-Figure Word

Move beyond the “big scary number,” discover the realities of health costs in retirement, and learn practical ways to manage them in a holistic financial plan.

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800.371.4613

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