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Health Savings Accounts Continue Their Rapid Growth

HSA-eligible health plan account holders satisfied with their ease of use, quality of coverage

BOSTON — Fidelity estimates that couples retiring today will need an estimated $260,000 for health care costs during retirement, so it’s no wonder employers and their employees are looking for ways to help tackle these daunting expenses.1 It is critical to factor health care costs as you plan for retirement income – through steady tax-advantaged savings including a portion that’s invested in the stock market.

Health savings accounts (HSA) enable people to put aside money both for today’s health care expenses while investing for medical costs they may incur in retirement (how HSAs work). HSAs are paired with high-deductible health plans (HDHP), which often have lower monthly insurance premiums than traditional health plan offerings, plus include three key tax benefits: contributions go in tax-free, balances grow tax-free, and savings can be withdrawn tax-free for medical costs.2 These unique savings opportunities help explain why assets in Fidelity HSAs® rose 50 percent during the past year to surpass $2 billion. Fidelity now has 657,000 individual account holders, a growth of 46 percent in just one year.3

"It occurred to us that the value of an HSA was getting lost in the details related to a high-deductible health plan. Moving participant accounts to Fidelity would be a great way to clarify that distinction," said Marco Diaz, senior vice president, Global Head of Benefits at News Corporation, a global media company. News Corp began offering its workforce a high-deductible health plan paired with a Fidelity HSA® during open enrollment 2016. "We want our employees to benefit from a range of programs that blend immediate term benefits with the ability to build equity for the long term. That channel is clear enough with 401(k) but an HSA offers an entirely complementary way of building something meaningful toward future expenses in retirement."

People saving in HSAs do not do so at the expense of a defined contribution (DC) retirement plan, such as a 401(k). Fidelity found that during 2016, people who had both DC and HSA accounts saved on average 10.7 percent of their annual income in the retirement account. Those with just a DC account saved on average 8.2 percent in it.

Account Holder Satisfaction is High, but Misconceptions Still Exist

Of those in an HSA-eligible health plan, 8 in 10 are satisfied with it.4 Seventy-six percent are satisfied with the ease of using their HSA for medical expenses, 77 percent with the quality of their health care coverage, and 77 percent with how the plan helps them manage their health care costs. Continued education by employers and HSA providers helps drive satisfaction and illustrate the benefits of HDHPs and HSAs, but misconceptions remain. Unlike contributions to health flexible spending accounts (FSA), unspent contributions to HSAs roll-over from year-to-year.5 Yet when asked, 39 percent of people believed they lost unspent HSA contributions at year end.

"Almost half of those people we surveyed dramatically underestimated their out-of-pocket health care costs for retirement, so it’s exciting to see so many now embracing HSAs as an opportunity to help them close this gap6," said Eric Dowley, senior vice president of HSA Product Management at Fidelity. "Assets held in Fidelity HSAs are increasingly invested outside of cash, which is a positive trend we’ve seen over the past five years.7"

HSAs Offer Investing Opportunities for Longer-Term Health Care Costs

Account holders may want to consider investing a portion of their HSA balance outside of cash, such as in a mutual fund with a view toward long-term investment. Some account holders wait until they accumulate a large enough balance to cover their annual estimated out-of-pocket medical costs (single or family) before they invest. Others invest immediately, opting to pay their medical costs out-of-pocket and use their HSA as a long-term investment account for retirement. To help more HSA account holders take advantage of long-term, tax-advantaged, compounding saving, Fidelity significantly lowered its investment minimum for Fidelity® Asset Manager Funds from $2,500 to $500 when invested within an HSA.

"Employers should consider an HSA provider’s ability to help their account holders learn how to invest and their range of investment options," said Dowley. Nationally, 15 percent of all HSA assets are invested outside of cash.8 But of assets held in Fidelity HSAs, more than 21 percent are invested, helping more people build long-term savings for health care costs in retirement.

About Fidelity Investments

Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $6.1 trillion, including managed assets of $2.2 trillion as of April 30, 2017, we focus on meeting the unique needs of a diverse set of customers: helping more than 26 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit

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