Low-cost colossus Vanguard has partnered with HealthEquity, which claims to be the nation’s largest independent health savings account (HSA) custodian.
The two will team to provide DC sponsors and participants a new service integrating health and wealth planning for retirement.
Vanguard will offer sponsors the ability to provide HealthEquity HSA products to their employees that feature Vanguard funds or the same investment options as their 401k plan line-up.
For Vanguard participants who choose a HealthEquity HSA, Vanguard’s Retirement Readiness Tool technology will integrate their HSA information with their 401k balance and other assets “to give them a comprehensive view of their current and future retirement savings,” according to the announcement. “Participants will also benefit from highly personalized communications that are rooted in behavioral finance and proven to successfully encourage their next best action.”
“Consumers who learn to use HSAs and DC plans together are on the fast track to retirement readiness,” Jon Kessler, President and CEO at HealthEquity, said in a statement. “Our partnership with Vanguard offers plan sponsors a powerful solution to connect health and wealth.”
With $1.1 trillion in DC assets under management, Vanguard serves as recordkeeper to more than 1,900 qualified plan sponsors and 4.8 million participants.
As a supplement to its new HSA solution, Vanguard plans to introduce a new proprietary health care cost calculator that will help participants to better plan and save for health care expenses in retirement.
Participants investing in an HSA enjoy several benefits, including a triple tax advantage:
1) contributions are made pre-tax or are tax-deductible;
2) earnings and interest accumulate tax-free; and
3) withdrawals for qualified medical expenses are also non-taxed.
After age 65, account owners can make withdrawals for any expense without a penalty; however, withdrawals used for anything other than medical expenses are taxed as income.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
