Fidelity Investments' health savings account (HSA) business is booming, with the Boston-based fund company announcing that it has $3 billion in HSA assets, which is up 50% year over year. In a press release, Fidelity said that it added 112 new employers last year that offer HSAs to their workers and now has 837,800 individual account holders accounting for the $3 billion in assets.
What's more, based on its analysis of people who save for healthcare, Fidelity found that 25% of employees with access to an HSA are using it, while 46% are electing to add the benefit when offered only an HSA-eligible health plan. Despite those levels of partcipation, the fund company also found that lots of workers aren't taking advantage of the tax-advantaged accounts.
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"With more than half of Americans naming rising health care costs as a top financial concern, this increased adoption of HSAs shows an encouraging trend that more people are making health care savings a priority," said Eric Dowley, senior vice president of HSA Product Management at Fidelity Health Care Group, in a press release. "But we still see a need for more education around how people estimate and plan for potential health care cost – both in the short and long term and how an HSA can be a valuable tool in addressing these expenses."
According to Fidelity's research, while HSAs are enjoying an uptick in usage, the individuals with the accounts aren't reaping all the benefits. In 2017, Fidelity found that individual and family account owners contributed on average just around half of what they could, coming in at $1,800 and $3,800, respectively. Contribution limits for this year are $3,450 for an individual and $6,900 for a family, noted Fidelity. Those over the age of 55 can also invest an additional $1,000 in catch-up contributions.
Another mistake that has huge implications is the misconception that if you don't use it now you will lose it. Fidelity said that close to 40% of people think that, if they don't spend what they contribute to an HSA, they will lose the money in that year. Of HSA account owners, 46% didn't know that they can invest contributions in mutual funds and other investments. Fidelity said that a majority keep their contributions in cash, with only 7.7% investing some of the money held in the account. What's more, Fidelity said that 54% of HSA holders didn't know that, as of age 65, the balances can be used for other expenses in retirement.