The potential drain that future medical costs could have on your ­clients’ retirement funds is a rapidly growing concern. Are agents equipped with the necessary financial products to plan for the medical costs their clients will have throughout their retirement?

A health savings account, or HSA, can eliminate that drain for their clients, while opening a revenue stream for the agent who sells it.

HSAs were created by the Medicare Act of 2003 as a way for consumers to take control of their health care expenses.

The HSA concept consists of two parts: the HSA-compatible health plan and the tax-favored HSA. The tax savings occur:

1) when contributions are made,

2) as the funds earn interest, and

3) when funds are used for qualified medical expenses.

After the account holder turns 65, HSA funds can also be withdrawn for non-qualified expenses at their ordinary tax rate, without penalty.

Fully portable

In addition to the tax-favored treatment, HSAs are owned by the individual and therefore 100% portable. Any unused funds accumulate in the account from year to year.

These unique advantages have made the HSA the star of the consumer-directed health care movement. HSA administrators have experienced substantial growth in HSA balances. In a March 2008 report from Inside Consumer-Directed Care, the estimated assets held in HSAs totaled $3.2 billion. HSA balances are projected to accelerate in the coming years, topping $200 billion by 2012, according to a report released by Celent.

As more people continue to accumulate funds in their HSAs, many are looking to invest their funds, much as they would with an IRA or 401(k).

An agent’s expertise in this area can provide additional benefits to their clients with an HSA as the agent guides their clients to invest their HSA funds.

The benefit to agents for offering the HSA product is additional assets to the portfolios they manage and a deeper relationship with their clients. Agents may earn commissions on the annual investment their clients make through their HSAs. The annual investment can be as much as the contribution limit determined by the IRS. The contribution limit for 2008 is $2,900 for single coverage and $5,800 for family coverage. In 2009, those limits will increase to $3,000 and $5,950, respectively. Additional “catch-up” contributions can be made in the amount of $900 in 2008 or $1,000 in 2009, by individuals that are 55 years-old or older.

Double-digit increases predicted

Agents will be assisting your clients to plan for their future out-of-pocket medical costs and helping them accumulate the necessary assets to pay for them. These costs are currently growing by double-digit percentages each year; in fact, the Center for Retirement Research determined that a person retiring in 2030 at the age of 65 will need nearly $190,000 for future out-of-pocket health care expenses. A couple will need more than $375,000.

By adding HSAs to an agent’s product offering, he or she will help clients plan for these future medical costs and help them protect their retirement assets, which will assist them in maintaining a higher standard of living throughout their retirement.

Kirk Hoewisch has led HSA Bank’s initiative to offer Medical Savings Accounts (the predecessor to Health Savings Accounts) on a national scale since 1997. He can be reached at 866-357-5232 or by email.