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3 things to tell your employees who are ready to retire about their HSAs

By Sara Taylor | October 6, 2023

Help employees understand the power of HSAs leading up to and during their retirement years.
Spending Accounts|Benefits Administration and Outsourcing Solutions|Retirement

Late-career-stage employees think a lot about their plans for retirement and wonder if they are financially equipped to realize those plans. Employers can play an important role in helping to educate employees about their options, particularly as it relates to their health savings accounts (HSAs).

HSAs have proven advantages for employees, and most employers are familiar with communicating their main benefits (triple-tax-free, portability, investment options). However, using the same talk track with all employees may not be the most effective way to meet their needs.

An employee who is nearing retirement age will have a different set of goals — not to mention budget — than someone who is just entering the workforce. It’s important to consider the unique needs of the pre-retiree population as retirement age draws near.

Communicating about HSAs to pre-retirees

Employees who are close to or considering retiring are at a very unique time in their lives as well as their careers. While there is tremendous excitement about what lies ahead, there could also be a great deal of uncertainty as to how well prepared they are financially. For employers, focusing on the needs of these employees at this stage of their career is just as important as doing so at any other stage of their professional journey.

This is a perfect opportunity to educate employees who are nearing retirement about how to leverage their HSA benefits both before and after retirement and to discuss actions they must take.

We’ve identified three critical communication messages about HSAs to give your employees who are approaching retirement age.

  1. 01

    Encourage employees to consider catch-up contributions

    Let’s face it, as people age, they’re more likely to have additional medical needs and higher medical costs. Making catch-up contributions to an HSA is a great way for employees age 55 or older to set aside even more money to pay for medical expenses now or in retirement.

    Employees age 55 or older can make an additional $1,000 catch-up contribution over the IRS annual limits, which are $4,150 for a single person and $8,300 for families in 2024.

  2. 02

    Tell employees they must take action before they are enrolled in Medicare

    People enrolled in Medicare are no longer eligible to contribute to an HSA. And there are tax and financial penalties if employees continue to contribute to an HSA when they are not eligible. To reduce the risk of these penalties, the Centers for Medicare and Medicaid Services and the IRS suggest employees stop contributing to their HSAs before they turn age 65 or more than six months before they enroll in Medicare if they are delaying Medicare enrollment until after age 65.

  3. 03

    Remind employees what happens to their HSA balance once they stop contributing

    The money in their HSA is theirs to keep. The funds already in their HSA can still be used tax-free for eligible medical expenses, which can include Medicare premiums and out-of-pocket costs, as well as certain other health expenses.

    Once people reach age 65, HSAs allow money to be withdrawn for non-healthcare expenses as well, without a penalty, but those expenses will be subject to income tax.

Individuals who are approaching retirement face a lot of unique challenges in the current environment — from the economic uncertainties of inflation, taxation and market fluctuations to the rising costs of senior living facilities and elder care, to questions about when to take Social Security benefits. While they may have worked hard to save enough for these years, the realities can cause much uncertainty when the time to retire actually arrives. Employers that understand and address these unique needs will foster engagement with all employees throughout their tenure with your company.


Senior Director, Employee Spending Accounts
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