How Women Can Use HSAs for Retirement Success and Security

Key takeaways:

Overall, women have lower retirement savings than men due to a number of factors, including the wage gap.
They also tend to live longer than men and need long-term care, making it even more important for them to save.
HSAs offer a way for women to save for retirement and future healthcare expenses.

Women often view themselves as less confident investors than men in surveys. But there are good reasons for them to take control of their financial destinities—especially when it comes to retirement planning. Women typically live longer than men and are at risk of lower savings. Plus, they’re likely to earn higher returns than men when they do invest.

A health savings account (HSA) can be a valuable investment vehicle for women. It allows them to save for their future and set aside money for the health and wellness of themselves and their families.

Here’s why retirement planning matters for women and how HSAs can help them get started.

As always, the information we provide here is general guidance. Be sure to consult with a financial or tax adviser before making any decisions about your own situation.

Women Face a Retirement Savings Gap

Women generally face a tougher financial road in retirement than men

Women are more likely than men to be living in poverty or at the poverty line by age 65, and they average far lower balances in their retirement accounts than men. This is despite the fact that women’s participation rates in their employers' retirement plans are similar to men’s.

A number of factors contribute to women’s lower retirement security compared to men:

Women working full time earn 82.7 cents for every dollar men earn.
Women are overrepresented in lower-wage occupations, making it harder for many of them to save.
They are also more likely to work part time and spend fewer years in the workforce so that they can care for children and other family members.
They may lack access to employer-sponsored retirement plans.

Social Security provides an important safety net. But Social Security benefits are significantly lower for women than they are for men due to women’s lower lifetime earnings and spending less time in the workforce than men.

All of this has to be considered alongside the fact that women generally live longer than men—so they need their retirement savings to last longer. And they're more likely to need costly long-term care later in life: 75% of U.S. nursing home residents are women.

How an HSA Can Help Women Save

One thing women can do right now to set themselves on a path toward viable long-term finances is to consider a health savings account (HSA).

Many people use their HSAs to cover short-term medical expenses. But an HSA provides more tax advantages than regular retirement accounts, and it can double as a back-up retirement account. If you can pay for your routine medical expenses without depleting your HSA, the money can grow for decades and serve as a nest egg dedicated to tax-free funding for the long-term care that you're more likely to need.

Statistics show women also tend to be less comfortable with investing than men, but often see better returns when they do. Investing your HSA funds is a flexible way to help you secure a more financially solid future, and any earnings grow tax free.

Planning Success With an HSA

If an HSA-qualified, high-deductible health plan (HDHP) fits your needs and is available to you, consider enrolling. You can do this through your employer, or you can sign up for an HDHP in the individual market (through the health insurance exchange in your state, or directly through an insurance company).

And if you sign up for HDHP coverage, make every effort to fund your HSA. Your employer will probably contribute to your HSA as well: Three-quarters of employers that offer HDHPs also contribute to their workers' HSAs.

Once you put money in your HSA, try to let it stay there. Recognizing an HSA as a long-term savings vehicle can be a key component of preparing for the financial realities many of us will face in our later years.

That doesn't mean you can't take money out of your HSA for your current medical needs. But don't limit your contributions to only what you think your immediate medical expenses will be. An HSA’s benefits get better with time, as you let compound growth work its magic.

In Summary

The sooner you start all of this, the better. If you're 25, the idea of living in a nursing home might be hard to imagine. But your future self may look back and thank you if you start setting aside funds today to cover your future healthcare costs. And an HSA just might be the perfect place to start.