Health Savings Accounts Continue Their Rapid Growth

HSA-eligible health plan account holders satisfied with their ease of use, quality of coverage

BOSTON--()--Fidelity estimates that couples retiring today will need an estimated $260,000 for health care costs during retirement, so it’s no wonder employers and their employees are looking for ways to help tackle these daunting expenses1. It is critical to factor health care costs as you plan for retirement income – through steady tax-advantaged savings including a portion that’s invested in the stock market.

Health savings accounts (HSA) enable people to put aside money both for today’s health care expenses while investing for medical costs they may incur in retirement (how HSAs work). HSAs are paired with high-deductible health plans (HDHP), which often have lower monthly insurance premiums than traditional health plan offerings, plus include three key tax benefits: contributions go in tax-free, balances grow tax-free, and savings can be withdrawn tax-free for medical costs2. These unique savings opportunities help explain why assets in Fidelity HSA®s rose 50 percent during the past year to surpass $2 billion. Fidelity now has 657,000 individual account holders, a growth of 46 percent in just one year3.

“It occurred to us that the value of an HSA was getting lost in the details related to a high-deductible health plan. Moving participant accounts to Fidelity would be a great way to clarify that distinction,” said Marco Diaz, senior vice president, Global Head of Benefits at News Corporation, a global media company. News Corp began offering its workforce a high-deductible health plan paired with a Fidelity HSA® during open enrollment 2016. “We want our employees to benefit from a range of programs that blend immediate term benefits with the ability to build equity for the long term. That channel is clear enough with 401(k) but an HSA offers an entirely complementary way of building something meaningful toward future expenses in retirement.”

People saving in HSAs do not do so at the expense of a defined contribution (DC) retirement plan, such as a 401(k). Fidelity found that during 2016, people who had both DC and HSA accounts saved on average 10.7 percent of their annual income in the retirement account. Those with just a DC account saved on average 8.2 percent in it.

Account Holder Satisfaction is High, but Misconceptions Still Exist
Of those in an HSA-eligible health plan, 8 in 10 are satisfied with it4. Seventy-six percent are satisfied with the ease of using their HSA for medical expenses, 77 percent with the quality of their health care coverage, and 77 percent with how the plan helps them manage their health care costs. Continued education by employers and HSA providers helps drive satisfaction and illustrate the benefits of HDHPs and HSAs, but misconceptions remain. Unlike contributions to health flexible spending accounts (FSA), unspent contributions to HSAs roll-over from year-to-year5. Yet when asked, 39 percent of people believed they lost unspent HSA contributions at year end.

“Almost half of those people we surveyed dramatically underestimated their out-of-pocket health care costs for retirement, so it’s exciting to see so many now embracing HSAs as an opportunity to help them close this gap6,” said Eric Dowley, senior vice president of HSA Product Management at Fidelity. “Assets held in Fidelity HSAs are increasingly invested outside of cash, which is a positive trend we’ve seen over the past five years7.”

HSAs Offer Investing Opportunities for Longer-Term Health Care Costs
Account holders may want to consider investing a portion of their HSA balance outside of cash, such as in a mutual fund with a view toward long-term investment. Some account holders wait until they accumulate a large enough balance to cover their annual estimated out-of-pocket medical costs (single or family) before they invest. Others invest immediately, opting to pay their medical costs out-of-pocket and use their HSA as a long-term investment account for retirement. To help more HSA account holders take advantage of long-term, tax-advantaged, compounding saving, Fidelity significantly lowered its investment minimum for Fidelity® Asset Manager Funds from $2,500 to $500 when invested within an HSA.

“Employers should consider an HSA provider’s ability to help their account holders learn how to invest and their range of investment options,” said Dowley. Nationally, 15 percent of all HSA assets are invested outside of cash8. But of assets held in Fidelity HSAs, more than 21 percent are invested, helping more people build long-term savings for health care costs in retirement.

About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $6.1 trillion, including managed assets of $2.2 trillion as of April 30, 2017, we focus on meeting the unique needs of a diverse set of customers: helping more than 26 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit

Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Fidelity reserves the right to modify or cancel any concept designs being mentioned. This information should not be construed as an offer to sell or a solicitation to buy any product or service.

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900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.,
500 Salem Street, Smithfield, RI 02917

National Financial Services LLC, Member NYSE, SIPC,
200 Seaport Boulevard, Boston, MA 02110

© 2017 FMR LLC. All rights reserved.

1 Estimate based on a hypothetical couple retiring in 2016, 65-years-old, with average life expectancies of 85 for a male and 87 for a female. Estimates are calculated for “average” retirees, but may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. Life expectancies based on research and analysis by Fidelity Investments Benefits Consulting group and data from the Society of Actuaries, 2014.
2 With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation. The triple tax advantages are only applicable if the money is used to pay for Qualified Medical Expenses as described in IRS Publication 969.
3 2016 account holder growth rose to 657,000 from 451,000.
4 Represents the findings of an online survey conducted among a demographically representative U.S. sample consisting of 5,133 adults, 18 years of age and older. Interviewing for this CARAVAN® Survey was completed Dec. 9-21, 2016, by ORC International, which is not affiliated with Fidelity Investments. 1,309 respondents enrolled in an HSA-eligible health care plan were included in the analysis. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study.
5 Some health flexible spending accounts (FSA) allow up to $500 per year to carryover. It is a plan design element dependent on the employer.
6 Ibid 4.
7 Assets invested outside of cash five years ago were 17 percent (2012).
8 Devenir Research, “2016 Year-End Devenir HSA Research Report” (link).


Fidelity Investments
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
Chuck Kabat, 617-563-3365

Release Summary

Fidelity releases its annual health savings account business update. In addition to 2016 growth data, the release discusses the numerous benefits of HSAs and why employers are offering them.


Fidelity Investments
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
Chuck Kabat, 617-563-3365