Saving for Health Care in Retirement: The Use of Health Savings Accounts

Source: Employee Benefit Research Institute, EBRI Notes, Vol. 29, No. 8, August 2008

From the executive summary:
• Use of HSAs: Health savings accounts (HSAs) are tax-favored individual accounts that can be used to cover health insurance premiums and out-of-pocket expenses for health care services, and a possible vehicle for funding future retiree health care costs.

• HSA potential is limited: Statutory contribution limits make it unlikely that these accounts will play more than a minor part in savings for health care costs in retirement. The maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses, especially since individuals can (and may need to) use HSA assets to pay for health care services during their working years or to pay COBRA premiums and insurance premiums during periods of unemployment.

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