Even though your employees may be focused on the day-to-day right now, it’s not too early for them to start planning for the future. And with the cost of health care projected to continue to rise, preparing to pay for this big expense in retirement should be a top priority.
Consider these facts:
- 42 percent of Americans have less than $10,000 saved. [i]
- The average 65-year-old couple retiring in 2018 will need $280,000 to cover health care and medical costs during retirement – and that doesn’t include long-term care. [ii]
- Out-of-pocket health care costs for Medicare beneficiaries are likely to take up half of their average Social Security income by 2030. [iii]
Health Savings Accounts and 401(k)s
Health care costs show no signs of slowing down. And since they’ll eat up a big chunk of a retirement budget, some workers are even opting to delay retirement to have more time to save. But as an employer, you can put retirement in reach by helping workers prepare with a Health Savings Account and/or 401(k).
Health Savings Account: A health savings account (HSA) coupled with a high-deductible health plan allows employees to save for future health care costs tax-free. Contributions are pre-tax or tax deductible, the balance grows tax-free, and there’s no tax on withdrawals used for health care expenses. Plus, the funds automatically roll over from year to year.
401(k): A 401(k) is an employer-sponsored savings plan that lets employees contribute money tax-free and invest in a range of plan investment options. And workers don’t pay taxes on the investment growth either. However, when a member withdraws funds, their distributions are taxed as ordinary income.
For many workers considering retirement, how to pay for medical expenses is a big concern. But you can boost your employees’ confidence about reaching their retirement goals with an employer-sponsored savings vehicle. Click here to learn how Complete Payroll Solutions can help.