Health Savings Account Blog

The paper was published this month by Boston-based Financial Research Corp.

"If you're a customer and you try to find Health Savings Accounts on some sites, you can't even locate them," said Lynette DeWitt, research director at FRC.

While HSA assets remain low, and while marketing may not be the only answer to bolstering them, Ms. DeWitt believes that improvements in online marketing would help consumers find information on Health Savings Accounts.

She and others in the retirement industry advocate Health Savings Accounts as part of an overall retirement nest egg.

"It's the only account that plays a dual role. The advantage of the account is if you have a health-care problem in retirement, you can draw from this," Ms. DeWitt said.

"But if you're healthy, you can use it for retirement. The advantage of the account is still unsurpassed as a product."

Despite interest in Health Savings Accounts, assets aren't growing fast, because participants are withdrawing money to pay for current health costs, she said.

Ms. DeWitt revised her projection for Health Savings Account asset growth downward, saying Health Savings Account assets will total $15 billion in 2010, up from $4 billion at the end of 2007. A previous white paper published by FRC in 2005 projected that HSA assets would hit $50 billion by 2010.

One obstacle to growth is uncertainty about the product's future in the current political climate. If a Democrat becomes president and pushes forward with a universal-health-care plan, the necessity for Health Savings Accounts could diminish.

Politics notwithstanding, many employees, small businesses and even large corporations are still interested in Health Savings Accounts, said John Heywood, a principal at Vanguard.

Vanguard's HSA assets are roughly $60 million, which is about double what they were a year ago, he said.

Consumers can't purchase Health Savings Accounts directly from Vanguard, but they can receive education and information on Vanguard's site and are directed to other websites where they can purchase products.

"What happens will be mainly driven by the tax code treatment of Health Savings Accounts," Mr. Heywood said. "Today, they're triple tax-free, and it appeals to people."

HSA contributions are pretax, and the earnings on the investment are tax-free as are withdrawals for qualified HSA expenses.

Advisers are continuing to see more interest from clients in Health Savings Accounts, said James J. Holtzman, a certified financial planner and adviser with Legend Financial Advisors Inc., a Pittsburgh-based company which manages almost $350 million in assets.

MORE INTEREST

"We're definitely starting to see more interest in Health Savings Accounts," he said. "I've been talking about it more and more in the last year than I had in the first few years."

Between 5% and 10% of Mr. Holtzman's clients have begun Health Savings Accounts, but he noted that the numbers are lower in his practice because about 70% of his clients are over the age of 60 and many are already retired.

"This tax benefit just doesn't exist anywhere else," Mr. Holtzman said.

Health Savings Accounts continue to gain traction, agrees Eric Remjeske, president of Devenir Group LLC, a Minneapolis firm that provides HSA investment options. He declined to disclose his company's assets under management.

Mr. Remjeske also believes that Health Savings Accounts will be used as a tool for retirement planning.

"We think it's a huge factor in retirement planning that hasn't been taken into consideration to date, and you'll see a lot more of it," he said.

"I think fund companies are paying more attention to Health Savings Accounts, and they realize it's a supplemental planning tool that's becoming more and more important."