HSA: A Retirement Account for your Health
Health care is often one of the most significant expenses in retirement. By contributing to an HSA while working, you can build a dedicated account to fund health care costs while working and fund future health care costs while in retirement. You can create a dedicated fund to cover expenses in retirement while preserving the value of your other retirement accounts.
An HSA account offers Triple Tax Advantages.
Tax-Deductible Contributions with pre-tax dollars, which reduce your taxable income in the current year
Tax Free Growth, as most HSA accounts allow you to use excess HSA funds to grow by earning interest, or invest in the market
Tax-Free Withdrawals when you use your HSA funds to pay for qualified medical expenses
Other Benefits of an HSA Account
The HSA belongs to you, funds roll over from year to year, and stay with you if you change jobs or health care plans
Individuals age 55 and older can make additional catch-up contributions per year
There is no required minimum distribution, unlike other traditional retirement accounts
Provides an additional source of tax-advantaged income in retirement.
Important considerations
To be eligible to contribute to an HSA, you must be enrolled in a High-Deductible Health Care Plan
Understanding what the IRS defines as qualified medical expenses to ensure distributions from an HSA can be made tax-free withdrawals.
HSAs are relatively new, having been created in 2003, and our older generations did not have full access to them during their working careers. It has become a vital retirement tool in paying for health care costs and controlling taxability on those costs in retirement.