Happy Friday, everyone! While the fireworks displays are starting to slow down, the health savings account (HSA) news continues to come in. While most of the headlines we see cover the longstanding benefits of HSAs -- and that's great news -- we're also starting to see some stories covering some HSA policies that might need to change.
This week's story could lead to some major changes for Medicare Part A recipients if the proposed legislation passes in Congress -- especially with the rising number of people choosing HSAs each year. Let's take a look.
Latta authors legislation expanding access to health savings accounts - Sentinel-Tribune (Ohio)
Congressman Bob Latta, R-Bowling Green, Kentucky, introduced legislation to expand access to health savings accounts and fix a technicality that prohibits individuals that are receiving Social Security benefits from contributing to their HSA accounts.
With the growing number of customers choosing high-deductible health plans (HDHPs), Latta noticed an uptick in complaints about this issue from his constituents, and quickly wrote the legislation.
As it currently stands for HSA owners, once they start collecting Social Security benefits, they have to stop making contributions to their HSA! This is because once you collect social security, you're automatically enrolled in Medicare Part A, disqualifying any further HSA contributions. This also counts for spouses, unless they have their own separate HSAs.
One of Latta's constituents pointed out this problem, because while her husband retired, she was still working, and was required to keep a HDHP, without putting any more money in the HSA.
Latta's legislation is timely because of the steady growth of HSA enrollment, and would lift this contribution ban so people can truly make the most of their tax-free health savings.
From a customer perspective, there's no doubt this concern has some merit, since retirees are receiving a fraction of what they expect to need for comfortable retirement, like we see in the next headline.
Pre-Retirees Expect to Need More Money Than What Retirees Spend - Lee Barney, PlanAdviser
People ages 55 and up expect to need 13% more income to live comfortably in retirement than retirees actually save, according to Schroder's "Global Investor Study: Saving for a Comfortable Retirement," based on a survey of 22,000 people in 30 countries. In the U.S., pre-retirees think they will need 74% of their income to live comfortably in retirement, but retirees actually save 58%, an uncomfortably large difference.
However, the cost of living in retirement takes up more income than expected. In the U.S., pre-retirees expect they will spend 32% of their income on living costs, while retirees actually spend 54%.
And this is centered on expectations, which change as people mature. For example, millennials expect to allocate 23% of their savings to their retirement income, but baby boomers are putting a big chunk more -- 38% to be exact. The average allocation is 36%, so younger generations might have some catching up to do.
Until next week, enjoy what's left of the fireworks displays, and tune in next week for another round of the industry's best health savings headlines.
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.