Using An HSA For Retirement

by | | Retirement, Taxes

Using an HSA for retirement

Most people spend their HSA money on current medical expenses. This is fine, but using an HSA for retirement is even better!

HSA as a retirement account

A Health Savings Account (HSA) lets you deduct your contributions, and pay medical expenses tax-free. Thus, an HSA is a powerful tax-saving tool even if you spend the money right away. But an HSA is also the best retirement account!

An HSA is triple tax-free

Used correctly, an HSA is triple tax-free!

  • You get a tax deduction for your contribution.
  • The account grows tax-deferred (you don’t pay any tax along the way).
  • Withdrawals for qualified medical expenses are tax-free.

No other account has all three of these tax benefits.

Leave your HSA alone until you retire

Follow these steps:

  • Pay current medical expenses from your bank account, not your HSA.
  • Invest your HSA in stocks to grow for the long term.
  • Pay medical expenses from your HSA in retirement.

Many people must pay current medical expenses from their HSA because they don’t have other funds available.  But most ER docs can afford to leave their HSAs alone.

Why an HSA is so powerful for retirement

An HSA is so powerful because qualified withdrawals are tax-free, and you have a long time to build up the balance with contributions and investment returns before you start taking money out.

In this way, an HSA acts like a Roth IRA. Both accounts are powerful because qualified withdrawals are tax-free. If we’re splitting hairs, an HSA is the absolute best retirement account because you get a tax deduction for your contributions too!

To make sure you’re getting the most out of your HSA, schedule a FREE Financial Pulse Assessment™. This is a 3-step process to help evaluate our services and make an informed decision about working together.

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