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Preparing Employees for Retirement

2 min read

30 sec brief

Helping employees stay healthy and prepare for retirement is at the core of most benefits offerings. Healthcare insurance is for today and retirement savings is for tomorrow.  These two benefits serve as the stable of any well-rounded benefits plan.

Helping employees stay healthy and prepare for retirement is at the core of most benefits offerings. Healthcare insurance is for today and retirement savings is for tomorrow.  These two benefits serve as the stable of any well-rounded benefits plan.

Employee Retirement Benefits

The standard approach for employee retirement benefits is a 401(k). This allows employees to make automated pre-tax payroll contributions (based on payroll cycles). The automated features of 401(k)s allow employees to ‘set and forget’ their 401(k) and ensure they are saving designated money from each paycheck for retirement.

Retirement benefits success starts with proper employee education and engagement so they can better understand expected retirement costs.

What’s Missing?

If a 401(k) is the standard approach aren’t employees covered with this single benefits feature? Maybe not. Retirement healthcare costs are expected to exceed $275,000 for couples – on top of Medicare. Additionally, Social Security doesn’t seem like it will be offering much security in the future. All of these systems will fall short of paying for all health costs in retirement.

Do employees have enough funds to cover these costs? Or are there other benefits they can add to better prepare for these out-of-pocket health expenses in retirement?

Long-Term Health Cost View

Understanding health costs in retirement and the financial burden that it can create requires investigation into other pre-tax savings options. Adding an HSA to an HSA-eligible health plan, like an HDHP creates tax-free savings for health costs today and in retirement.

Employees can use an HSA, along with the triple-tax advantages it creates to lower the cost of health expenses. While HSAs were intended for short-term health expenses, like out-of-pocket medical expenses this year, their tax structure makes them the new stealth IRA.

Combined Results: 401(K) and HSA

Combing a 401(k) and HSA adds more retirement saving options for employees. An HSA can help pay for all health costs in retirement. Just in case employees don’t use that money for health expenses, after the age of 65, employees can use it for anything, not just health expenses. And let’s be honest, the more money employees have saved for retirement, the better! Combing a 401(k) and HSA ensures employees are better prepared for retirement.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

About the author

Lively

We are HSA Experts! Lively is a Health Savings Account (HSA) platform for employers and individuals. A 401(k) for healthcare.

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