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Three ways an HSA can pave the way towards a financially healthy retirement

With a health savings account (HSA), it’s never too late for employees to boost their tax savings so they can better prepare for a healthy and happy retirement.

PayFlex Engage     Three ways an HSA can pave the way towards a financially healthy retirement 



Now more than ever, business leaders recognize the importance of maintaining a healthy and engaged workforce. Healthy employees are more productive and happier at work, which can lead to a stronger, higher-performing workforce.1

According to a recent Aon survey, a 3% improvement in employee well-being can result in a 1% increase in customer satisfaction and retention. Moreover, a 4% well-being improvement can produce a 1% increase in company profits.2 That’s why many businesses are focusing on implementing programs and benefits that can help improve their employees’ total health and well-being.

There is, however, one important aspect of holistic employee wellness — financial well-being — that could use more support. Employers play an important role in helping employees connect to resources and improve their financial security. According to the 2021 Workplace Wellness Survey conducted by the Employee Benefit Research Institute (EBRI) and independent research firm Greenwald Research, 49% of employees expressed at least moderate concern about their household’s financial well-being, and 63% said they feel stressed when thinking about their financial future.3     



Saving is a top concern among employees 

When looking at the cost of health care today, it’s no wonder employees are feeling stressed about their future’s finances. Consider this: A healthy 65-year-old couple who retires in 2021 is expected to have projected lifetime health care costs of $662,156.4 Moreover, health care expenses are expected to consume 68% of an average 65-year-old couple’s Social Security benefits.4

Studies show that people don’t feel financially prepared to afford their future health care expenses.5 This is where a Health Savings Account (HSA) can make all the difference. Using an HSA to prioritize planning and saving now can help employees build a healthy HSA balance by retirement, so they won’t have to tap into their retirement funds for health care expenses.

What can you do to help? 

Educate your employees on the value of using a tax-advantaged HSA for health care expenses — rather than a 401(k) or IRA alone — to maximize their tax savings as they approach retirement.



Why an HSA is the premier savings vehicle for health care costs in retirement

Your employees may be familiar with saving for retirement with a 401(k) or Roth IRA. But neglecting their triple-tax-advantaged HSA can mean a missed opportunity to save on future health care costs. Here’s why. 



  • Employees can use 100% of their funds (versus roughly 75% of 401(k) funds after taxes) for eligible health care expenses without paying any taxes on contributions, withdrawals or earned interest, now and in the future.
  • Employees are in control of when they take distributions from their HSAs.
  • Without a withdrawal requirement, their accounts can continue to grow over time, earning interest and/or investment income.



  • Funds are designated for expenses incurred in retirement; early withdrawals include financial and tax penalties.
  • Once employees begin making withdrawals, they pay income tax, regardless of how the funds are spent.
  • Employees are required to start account withdrawals at a certain age. 
Your employees can best prepare for a healthy future when they create a financial strategy to use both their 401(k) and HSA to save. With a 401(k), employees can contribute up to their employer’s 401(k) match. They can then put any additional funds that they would have contributed to their 401(k) into their HSA. If their HSA is maxed out, they can put additional dollars into their 401(k).
To maximize the benefits of the HSA, employees can start contributing to it as soon as they are eligible. They can contribute the maximum amount, which for 2022 is $3,650 for individuals and $7,300 for families. Once their HSA reaches a certain balance, they can start investing their money in mutual funds for additional tax-free growth.6



Three ways you can help employees prepare for a financially healthy retirement

As an employer, you can positively influence your employees to consider their future health and well-being. Here are three action items you can take to help your employees plan for a healthier, more secure retirement:


1. Remember that timing matters 

  • Use open enrollment to position your HSA benefit as part of your financial wellness offering and explain how an HSA can help prepare for a healthy future.
  • Promote HSA Awareness Day, or “HSA Day,” on October 15 of each year. It’s dedicated to bringing the public and the health care benefits industry together to discuss the unique power of an HSA, and its ability to impact some of the most common issues Americans face today, such as planning for retirement.7
  • Make any season, not just enrollment season, a time to talk to your employees about an HSA and preparing for retirement. Consider including HSAs as topics in monthly newsletters and include them in any and all benefits education campaigns.

New HSA contribution limits are announced each year. Also, your employees and eligible spouse/partner age 55 and over can contribute an additional $1,000 above the limit each year. This extra “catch-up” contribution helps save more for future eligible health care expenses and for their retirement. Communicate the annual limits to your employees as soon as they’re announced and remind them of the catch-up provision. And take this opportunity to encourage maximizing tax-free contributions to their HSA to help pay for eligible health care expenses in retirement.


2. Broaden your communications 

Employees are used to receiving communications from their employer. To broaden your reach and achieve a better impact consider:

  • Send educational messages about HSAs in specific mailers or newsletters that you know your employees often read.
  • Within these pieces, highlight personal stories from employees and leaders that offer tips to their fellow colleagues. Testimonials help establish trust with your audience.
  • Leverage internal employee resource groups to improve reach and coordinate messaging so the information resonates with your employees.

3. Empower your employees 

As an employer, you play an important role in connecting employees to resources that help them plan, save, and pay for their personal well-being. With the right information, you can empower employees to develop savings strategies that will help them prepare for health care costs in retirement.

PayFlex is pleased to offer your organization this free e-book: Getting the most from your Health Savings Account (HSA) as you prepare for retirement.

This useful employee resource includes the following topics:

  • What is an HSA?
  • HSA and Roth IRA/401(k)
  • HSA in retirement
  • HSA and Medicare
  • HSA beneficiaries


1. Virgin Pulse. How employee health correlates with job satisfaction and productivity. July 8, 2021. Accessed December 1, 2021.

2. The One Brief. Why workforce wellbeing is vital to company performance. June 23, 2021. Accessed December 1, 2021.

3. Employee Benefit Research Group. 2021 Workplace Wellness Survey. Accessed December 1, 2021.

4. HealthView Services. 2021 Retirement Healthcare Costs Data Report. December 2020. Accessed October 14, 2021.

5. Stratman M. Are you prepared for health care costs while in retirement? February 15, 2021. Accessed December 1, 2021.

6. Tax references are at the federal level. State taxes may vary.

7. National Day Archives. National HSA Awareness Day. October 15. Accessed December 1, 2021.


This material does not contain legal or tax advice. You should contact your legal counsel or tax advisor if you have any questions or need additional information. PayFlex does not provide any payment or service in violation of any United States economic or trade sanctions. For more information about PayFlex, go to

HSAs are currently not available to HMO members in Illinois.

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