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HSAs Shrouded in Misconceptions

A new study by Fidelity Investments suggests a large number of people don’t know how HSAs work or how it can play a role in retirement planning.

By Javier Simon | April 04, 2017
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As America’s health insurance industry struggles through a state of uncertainty and Americans face rising health care costs, employers are turning to various strategies to help employees cover medical expenses.

One increasingly popular option is the health savings account (HSA), available to employees with high deductible health plans (HDHP). These products help people save and invest for current and future medical expenses.

However, new research by Fidelity Investments suggests many Americans are unaware of the various benefits HSAs can offer. According to the firm’s study “Making the Most of Your HSA,” only three out of ten people surveyed are aware that HSAs are not governed by a “use it or lose it” policy, which applies to flexible spending accounts (FSA).

Eric Dowley, senior vice president, HSA Product Management, Fidelity Investments, tells PLANSPONSOR that several people the firm surveyed are hesitant to enroll in an HSA because they believe their money is limited as it in an FSA.

However, there are plenty of steps industry stakeholders can take to encourage HSA use.

“As an industry, we have an opportunity to give people a better understanding what HSAs are and how they work,” he says. 

The money in HSAs rolls over each year and any investments continue to grow even past retirement as there are no required distributions at any age. Moreover, they offer a triple-tax advantage: contributions are made pre-tax, the money grows tax free, and qualified withdrawals aren’t taxed.

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