HSA Headlines - 6/7/19 - 401(k) or HSA? The retirement confusion continues

HSAs can cover thousands of eligible medical products and services, but most talk about these accounts turns to their retirement potential. After all, being able to cover healthcare expenses in the here and now while carrying over that savings for retirement is the key benefit of an HSA, but there are still plenty of retirement savings options out there that can give working professionals pause when electing benefits.

With the recent news of expanded HSA contribution limits, this week we're playing the long game with a bigger focus on retirement and making the right choice with the options available to working professionals.

Should you fund your HSA at the expense of your 401(k)? - Clark D. Randall, MarketWatch

Getting off on the right foot in retirement planning starts from the moment that most professionals enter the workforce, and while 401(k)s have held sway for decades, HSAs are giving some pause when electing benefits.

In a recent MarketWatch piece, financial planner Clark D. Randall outlined the most common retirement plan options (401(k)s, traditional/Roth IRAs) and advises that a combination of 401(k) savings AND HSA funds is the best path to a safe retirement.

Randall makes the great point that while 401(k)s are great savings vehicles, distributing those funds is another matter entirely as they are taxed at 15%. As opposed to seeing a 401(k) as a total retirement savings solution, Randall suggests funding both - using the HSA now to cover immediate health expenses, while saving the remainder for retirement health expenses.

In this way, account holders won't have to pay excessive on taxes on qualified 401(k) distributions at retirement, which hurts even more if this is a medical expense, as an HSA withdrawal for a qualified medical expense would be tax-free. And you still get to keep those sweet HSA tax deductions each year. These decisions are completely contingent on your financial situation, but this is one path forward that could be beneficial for some professionals.

A definitive guide to retirement health care costs - Meredith C. Carroll, The Week

While we're on the subject of retirement, The Week released a very handy guide to retirement healthcare expenses, and what individuals and families should expect when it's time to leave the working world.

The oft-cited number from Fidelity Investments 2019 analysis is that a couple retiring at age 65 should set aside at least $280,000 for retirement health expenses. That's certainly a lot to prepare for.

But the fact is, there is no single figure that will perfectly match your health needs, so creating a broad strategy that covers the essentials is a good step forward. If you are well into your career, this guide could be helpful to allow you to re-assess how much you've saved, and figure out some unique ways to save on healthcare expenditures before you've reached "Medicare age."


HSA Headlines is a weekly roundup of the latest, most relevant news and conversations about your health savings. It appears every Friday, exclusively on the HSA Learning Center. And for more about your physical and financial well-being, be sure to follow us on Facebook and Twitter.

Best Sellers

More From the Learning Center