Retirement life is the stuff dreams are made of. So many of us have been socking away money each month in 401(k)s, 403(b)s, or any flavor of IRA for years. Those types of accounts, however, are not the only options. Health Savings Accounts are also an excellent way to save for specific retirement needs. Let’s look at a few reasons why.
Rollover. While there is a fixed annual amount you can set aside in an HSA (limits for 2022 are $3,650 for an individual and $7,300 for a family), you keep any amount you don’t spend. Unlike other healthcare-specific accounts, you never lose the money you put in an HSA.
Tax advantage. Other traditional retirement accounts require you to pay taxes on the funds, whether it’s now or later. As long as the funds contributed to an HSA are used to pay for qualified medical expenses, they are never taxed. It is especially likely that you will need increased medical care in your retirement years, making this an excellent way to provide for yourself down the road.
Investing. If you are in a financial position where you can pay some medical expenses in cash, you may be able to save enough funds in your HSA to invest. Even if you’re only investing half of your HSA contributions annually, over the years the money earned on the investment will stack up.
It’s important to note that you must elect an HSA-compatible medical plan in order to open an account (although if you change plans down the road, the funds in the account are yours to keep). At your company’s next Open Enrollment period, check to see whether you have an HSA-compatible plan available to you.