You might be vaguely familiar with the concept of health savings plans for your current medical expenses, but did you know the accounts can also be used to supplement your retirement?
A Health Savings Account (HSA) can be an ideal savings vehicle because of its tax benefits, as a CNBC article
points out. In 2014, you can contribute as much as $3,300 in pretax dollars. An entire family can use an HSA and contribute as much as $6,550 for 2014. Withdrawals for the purpose of medical expenses are not taxed, and any distributions taken after age 65 for other purposes are taxed at a regular income tax rate.
In addition to the tax benefits, the HSA can be advantageous because unlike the flexible spending accounts some workplaces offer, you don’t lose the money in the account at the end of the year. It remains in the account as long as you own it, growing tax-free.
While you don’t need to be employed to have an HSA, you do need to have a high-deductible health plan.
So what’s the big deal about having an HSA going into retirement? Estimates about healthcare costs for seniors reveal that they can amount to a significant expense.
In 2012 the Employee Benefit Research Institute estimated that a 65-year-old man would need at least $70,000 in savings, and a woman of that age, $93,000, to have a 50 percent chance of having enough saved to cover health-care expenses in retirement.
Once you get a clear picture of how the HSA works, and the expenses you could face, it becomes easy to see where a tax-free source of money for healthcare expenses could be beneficial when you retire.
Find out how you could grow your healthcare savings tax free by continuing to make the type of investments you’re already making. Schedule your free checkup with a Senior Account Executive to discover how a self-directed HSA could benefit you.