PLANADVISER - July/August 2018 - 4

editor's letter
A Health/Wealth 'Plan'
A
few years ago, I needed a surgery to address a medical
issue that had been on my " watch list, " so to speak.
Routine labs showed a change in a condition that
warranted attention, and surgery was the recommended
course of treatment.
It happened to be the same year I'd given birth to my
third child and therefore had already maxed out my annual
health insurance deductible. The new labs came in just
a few weeks before the end of our plan year, and I found
myself making appointments and scheduling the procedure
immediately, to get that and various affiliated appointments
and expenses completed within the necessary time frame.
The night before the surgery, I found myself questioning
whether I had make the right choice-though I knew this
treatment was the recommended option. I hadn't given
myself much time to think about it because of the potential
cost of an additional couple thousand dollars. While this
medical decision was the right one at the time, the timing
of it was strictly based on our medical insurance year and
the financial considerations.
I was reflecting on this decisionmaking-or perhaps lack
thereof-in a discussion the other day with a friend who was
shopping for an orthodontist for her daughters. She realized
that by picking one a few neighborhoods away, she would
save over $1,000 on the first part of the treatment course
and multiple thousands over the next few years. The cost
savings was well worth the extra travel time, she believed.
Medical decisions are rarely, if ever, made in a vacuum,
and they loom large when one thinks about retirement
planning and saving. After all, health and wealth are clearly
connected, and, over the years, with the rising cost of insurance,
health programs at companies have required major
discussions between the finance and human resources (HR)
groups. It's partly why, over the past decade and a half,
health savings accounts (HSAs) have taken the country by
storm. Their growth-in number, assets and usage-has
been incredible, and rightly so.
After all, HSAs are not just an HR offering or just part
of a health insurance conversation-they're so much more.
They truly are part of an overall financial picture. The tax
treatment-no taxes when that income is deferred, growing
tax-free, and withdrawn tax-free for qualified medical
expenses-is unlike any other savings account.
The ability to turn them into income after age 65 for even
nonmedical expenses makes them of significant value for
retirement income planning. Consider this: If the estimated
amount needed by an average couple to cover medical costs
during retirement is $265,000, according to data last year
from the Employee Benefits Research Institute (EBRI), a
couple could pay that using a tax-free $265,000 withdrawal
from their HSA-assuming all expenses are qualified
medical expenses-or a $344,500 gross withdrawal from
their 401(k) plan, assuming a 30% overall tax rate.
If that same couple has expenses that are not qualified
medical expenses, they would take the same amount out
of either account. You can see why, at our recent PLANSPONSOR
National Conference (PSNC), some plan sponsors
spoke to me, wondering whether participants should
move their savings to an HSA over their 401(k) after maxing
out the employer match. I'm sure many of you are getting
similar questions.
[HSAs] truly are part of an
overall financial picture.
The tax treatment ... is unlike
any other savings account.
That conversation, to me, underlines one of the greatest
challenges I see with these accounts-how to explain all of
the above to participants. As employees have more workplace
options for saving-traditional 401(k), Roth 401(k),
HSAs, etc.-the discussion for how each individual can
best allocate his money is imperative but also complex. For
retirement plan advisers, it becomes increasingly important
to understand the HSA option if your clients are including it
as part of a benefits package.
HSAs' importance has been apparent to PLANADVISER
even just in seeing the traffic our stories on the accounts
generates now compared with only a few years ago.
With an eye to the role these accounts can play in the
retirement plan conversation, this year, ahead of PSNC, we
offered both plan sponsor and adviser attendees the opportunity
to join a half-day event called " HSA Essentials, " and
the attendance was impressive. In October, in New York City,
we'll host a day-long event solely about the accounts; we
already have great interest and are working with speakers
who are experts on HSAs, to ensure the content will be
valuable. That being said, I'd love to hear from you about
the role played by HSAs in your practice and how you are, or
are not, incorporating them. Please reach out.
Alison Cooke Mintzer, Editor-in-Chief, PLANADVISER
4 | planadviser.com july-august 2018
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PLANADVISER - July/August 2018

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