Retirement Planning 101

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Retirement Planning 101: Tips for Using Your HSA to Build Long-Term Wealth

Hello there! I’m Meredith, your friendly Client Services Manager here at Clarity.

My days are rich with opportunities to dive deep into the world of Health Savings Accounts (HSAs) and unearth strategies to maximize their potential for our valued clients. 

Today, I'm excited to peel back the layers of how HSAs, often seen as tools for managing immediate healthcare expenses, can also be powerful vehicles for long-term saving and investing, especially when it comes to supplementing retirement income.

Let’s dive in!

The Basics of Retirement Planning

Retirement benefits are a crucial part of attracting and retaining top talent. In fact, 60% of employees said their retirement benefits were one of the most important reasons they remained with their current employer.

When we talk about retirement benefits, 401(k)s and IRAs often take center stage. Both offer unique benefits for long-term saving:

  • 401(k)s, especially with employer matching, can significantly boost your retirement fund.
  • IRAs (both Traditional and Roth) offer flexible investment options with distinct tax advantages.

However, these aren’t the only players in the game. HSAs can complement these accounts, adding another layer to your retirement strategy by offering tax advantages and savings for healthcare costs in retirement.

HSAs for Retirement

HSAs serve a dual purpose. In the short term, they offer a triple tax-advantaged way to save for immediate medical expenses, covering everything from doctor’s visits to prescriptions.

But there’s more to HSAs than meets the eye. Over time, they can transform into potent long-term investment tools to help save for retirement.

At Clarity, we offer three HSA investment models tailored to different risk tolerances and financial goals. All are designed to help your HSA contributions grow, potentially turning into a significant nest egg.

Clarity HSA Investment Models

  • Managed: This account type is designed for novice investors who prefer to have our advisor tool automatically select and rebalance investments on an ongoing basis in accordance with their age and/or risk profile. It delivers a “do-it-for-me” approach to investing.
  • Self-Directed: This account type is designed for intermediate investors who desire to self-select from a menu of monitored investment options covering multiple asset classes to diversify their portfolio and then rebalance it manually. It provides a balance between do-it-for-me and DIY approaches to investing.
  • Brokerage is designed for adept investors who desire to perform advanced research and trading across hundreds of individual stocks and exchange-traded funds (ETFs). This account type offers a hands-on, DIY approach to investing.

For savvy investors, the Clarity HSA also offers Exchange-traded funds (ETFs) that give employees lower costs and diversified market returns. Fractional trading up to 8 decimal points enables ownership of high-value stocks like Apple or Berkshire Hathaway for as little as a penny.

Convenient features include auto-rebalancing, real-time account opening and trading, on-demand investment statements, historical performance of available funds, and more.

5 Essential Retirement Planning Tips for Employers and Employees

Here are five essential tips to maximize the benefits of HSA investing.

  1. Maximize HSA Contributions: Encourage employees to contribute the maximum allowable amount to their HSAs. Over time, these contributions can accumulate and grow, tax-free, providing a substantial fund for healthcare expenses in retirement.
  2. Promote a Diversified Portfolio: A well-rounded retirement plan includes a mix of 401(k)s, IRAs, and HSAs. Each has unique benefits and, together, they provide a comprehensive approach to retirement savings.
  3. Conduct Regular Financial Reviews: Annual or bi-annual reviews of financial plans can ensure that employees are on track with their retirement goals. Adjusting contributions and investments as necessary can optimize savings.
  4. Leverage Employer Contributions: If possible, offer contributions to employee HSAs as part of your benefits package. Even small employer contributions can help you save on taxes and motivate employees to save more while feeling supported in their retirement planning.
  5. Consult with a Financial Advisor: Partnering with a financial advisor can provide personalized guidance tailored to your unique financial situation. They can help you navigate the complexities of retirement planning and ensure your HSA strategy aligns with your overall financial goals.

Resources for Implementation

Getting started with an HSA investment plan is easier than you might think. Clarity offers a comprehensive platform that allows for easy HSA management and integrates seamlessly with other employee benefits.

Plus, our educational webinars, ask-me-anything (AMA) sessions, and one-on-one consultations can provide the guidance you need to help your workforce make the most of their HSAs for retirement. 

Charting a Path to Financial Security with HSAs

Health Savings Accounts are more than just a way to save on medical expenses. They're a crucial component of a robust retirement plan. By understanding and leveraging the power of HSAs alongside traditional retirement accounts, you can offer your employees a pathway to financial security in their golden years.

At Clarity, we're committed to simplifying the complex world of employee benefits, ensuring you and your workforce are well-equipped for a prosperous future. If you’re ready to enhance your retirement planning strategy with HSAs, our team is here to help every step of the way.

Thank you for joining me on this journey to financial wellness through smart retirement planning. Here’s to a future where retirement is not just a dream, but a well-planned reality!

Happy Investing!

Meredith Laroe, Manager, Client Services

Clarity Benefit Solutions