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The rising cost of health care (and health insurance) is a concern many Americans are facing today. But it’s also a concern many will face in retirement as well.
The HealthView Services’ 2021 Retirement Healthcare Costs Data Report estimates “the average healthy 65-year-old couple retiring this year can expect to pay more than $662,000 in lifetime Medicare and supplemental insurance premiums and out-of-pocket costs.”
This estimate does not include long-term care expenses which could cost tens of thousands of dollars more per year.
Fortunately, a Health Savings Account at Equity Trust could provide a tax-advantaged solution to help combat the rising costs of health care – now and in retirement.
5 Potential Benefits of a Self-Directed HSA
1. Health Care Savings with Potential “Triple Tax Benefits”
Arguably one of the most valuable features of an HSA are the tax advantages.
According to a recent CBS News Money Watch article by Ray Martin, HSAs have three tax benefits:
- Contributions to an HSA are tax-deductible (subject to income limitations)
- All cash and investments inside an HSA are not subject to tax and can compound tax-free.
- Distributions from an HSA are tax-free as long as they are used for qualified medical expenses.
“No other account for long-term savings allows this triple tax-free benefit,” the article says.
2. Health Care Savings that are Tax-Free Today
Unlike self-directed IRAs and other retirement accounts, you can begin enjoying the tax-advantaged benefits of an HSA well before age 59½ without tax or penalty, as long as the funds are used for qualified medical expenses.
For example, let’s say you have $1,000 of qualified medical expenses this year, including doctor’s visits and prescription medications.
You plan to pay the expenses out-of-pocket because they are less than the $2,700 deductible you have from your High Deductible Health Plan (HDHP).