We’ve heard it recently from EBRI, and new data is driving the point home: Americans don’t understand health savings accounts. It’s an unfortunate fact and certainly in need of remedying, especially considering the amount of money the typical person will spend on healthcare in retirement.
Trouble is, many vastly underestimate that expense, according to a new study.
In a survey of 1,200 Americans, HSA Bank discovered more than two-thirds of people are under the impression they’ll spend less than $100,000 on healthcare once they’ve retired. But research has shown retirees are likely to spend double that amount.
“Today’s consumer still requires guidance when it comes to their approach to their health and financial wellness,” Chad Wilkins, president of HSA Bank, said in a statement. “Many consumers don’t understand the benefits of an HSA and how this triple tax-advantaged account can help prepare them for the significant expenses they will incur during their retirement years.”
In fact, almost half (46 percent) of those surveyed were unaware of the tax benefits of HSAs. Four in 10 weren’t sure they could invest the funds in these accounts either.
Additional details in need of clarification include which healthcare expenses an HSA covers (42 percent of respondents don’t know) and whether or not HSA funds expire each year (41 percent are unsure).
All of this confusion likely explains (at least in part) why many Americans opt to save for healthcare in other types of accounts instead.
One in two respondents puts away money in a savings account, money market account or CD. Almost the same number (47 percent) save in a 401k. Around a third invest in mutual funds and stocks to build up savings for healthcare purposes.
Meanwhile, just 29 percent of those surveyed utilize an HSA.
“While some consumers simply don’t have an HSA, many consumers aren’t using them to save for healthcare expenses in retirement because they just don’t understand how they work. This offers an opportunity for financial advisors and employers to further educate consumers on the primary benefits of an HSA, including: tax benefits, investment opportunity, qualifying expenses and fund rollover,” the report concluded.
Jessa Claeys is a writer, editor and graphic designer.