How can advisors claim to be retirement experts yet offer no assistance to plan participants with the single greatest cost they face—health care? They can’t. Ryan Tiernan, The Capital Group’s national accounts manager, addressed this critical issue at a study group of top advisors, sponsored by consulting and advisory services firm Sheridan Road on Monday. “It’s not good,” he stressed, highlighting a major disconnect. Tiernan moderated a panel dedicated to health savings accounts (HSAs), a hot topic among advisors that is gaining increasing awareness among both employers and employees.
He began by quickly listing 10 positive attributes of the product that immediately get attention:
- Employer contributions
- Employee contributions
- Triple tax-free
- Participants can use money today, tomorrow or at retirement
- Investment capabilities
- Penalty-free after age 65
- No RMDs
- No impact to modified gross income
- No expiration date for receipts
- Spousal transfer of assets at death
“Is it a health and wellness product, or a retirement investment vehicle,” he rhetorically added. “At that point, we would say an HSA is a retirement savings vehicle.”
“And think about how great those are; for instance, No. 9. If you want to buy a $20,000 boat, and you go back and dig out receipts from medical expenses from 20 years ago, that just became a triple-tax-free vessel.”
It’s estimated the average participant will need, conservatively, between $200,000 and $400,000 to fund medical expenses in their later years. It’s a figure that all but wipes out savings, and something that leaves most people stunned and staring blankly when noted by the advisor, according to OppenheimerFunds Mike Daley when arguing for the importance of the HSA.
“The can stockpile savings, invest them and use them anytime,” he empathically explained. “Much of the focus of the HSA from a practical standpoint is how advisors get paid, which is a big issue now. But who cares? Talk about it and figure out how to get paid afterward, because it’s a competitive differentiator and most other retirement advisors aren’t talking about it.”
Channel Financial’s Mike Gulseth agreed and said “Right now, I’m telling HSA’s are better than 401(k)s, at least until they get a match,” a statement that drew questions and discussion from study group attendees. And, as with Daley, he concluded that few other are talking about it, which “curries favor with the plan sponsor or business owner because no one else has told them this.”