The ability of health savings accounts to cover future health care costs for retirees is being hindered by a combination of statutory limits and low interest rates, according to the Employee Benefit Research Institute.
A recent study, titled "The Use of Health Savings Accounts for Health Care in Retirement," estimates that the average couple turning 65 in 2010 will need just under $376,000 in savings to cover medical expenses that aren't covered under Medicare.
While HSAs, which work together with a high-deductible health plan to help cover costs, do partially fill the gap, the report finds that limits in both individual and family coverage will lead to shortages in coverage.
For example, if a 55-year-old in 2009 contributed $3,000 to an HSA and submitted the $1,000 catch-up contribution annually over the next 10 years, the account would accumulate $46,200, assuming an interest rate of 1 percent over the next decade.
The total is nowhere near the savings retirees would need to help pay for Medigap policies.
According to the study, retirees can only rely on HSAs to cover a portion of their health care costs. "What HSAs do is give people an option -- and it's a great option because money can build tax-free -- but it's limited," the report said. "So you still have to take advantage of other savings vehicles: max out your 401(k), take advantage of matching contributions and contribute to your IRA. All the options that were there before the creation of HSAs are still there."