HSA'S HELP WITH RISING RETIREE HEALTH CARE COSTS
March 28, 2007
A 65-year-old couple retiring in 2007 will need approximately $215,000 to cover medical costs in retirement, a 7.5 percent increase over the 2006 estimate of $200,000, according to Fidelity Investments' latest health care cost estimate.
Despite the increase, there is still room for optimism, says Fidelity. The Tax Relief and Health Care Act of 2006, enacted last December, brought important changes to the rules governing tax-advantaged Health Savings Accounts (HSAs). It created incentives for both employers and employees to better utilize HSAs in their respective efforts to help mitigate rising health care costs and save more for health care needs in retirement.
The most significant changes include:
- Eliminating contribution limits that were previously tied to High Deductible Health Plan (HDHP) deductibles; in 2007, the new maximum contribution limits are $2,850 for individuals and $5,650 for families.
- Allowing employers to initiate a one-time rollover of funds from an individual's health Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) to an HSA.
- Setting of annual statutory contribution limits earlier in the year (June 1) so employers can better prepare for annual enrollment.
In addition to offering an HSA, says Fidelity, employers should consider providing health guidance information and planning tools to their employees to help engage them in leading healthier lifestyles, understanding their personal health risks, and to equip them with strategies to better manage their current healthcare expenditures, while also planning for future health care costs.
Source: "Fidelity Investments Estimates $215,000 Needed to Cover Retiree Health Care Costs," Fidelity Investments, Insurance Newsnet, March 27, 2007.
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