It’s no secret that Health Savings Accounts (HSAs) are intended to help with the burden of medical costs, allowing the account holder to contribute pre-tax dollars to pay for qualified medical expenses with tax-free distributions, but an HSA can also be used strategically in planning for retirement. Some HSA account holders opt not to make withdrawals from the HSA account and instead treat it like another IRA account. If you are enrolled in a High Deductible Health Plan (HDHP) and are eligible for a Health Savings Account, it is prudent to consider the benefits of such an account for retirement.
As contributions are made into the HSA year over year, there is the option to invest the funds to earn returns and potentially increase the overall account balance. Similar to retirement accounts, HSAs have contribution limits; someone filing as ‘single’ in 2024 has a contribution limit of $4,150 while those who file ‘married filing jointly’ are limited to $8,300. These limits increase by a catch up amount of $1,000 for those age 55 and older. Unlike retirement accounts, you do not have to have earned income to contribute to a health savings account allowing you to lessen your tax burden even into retirement. Contributions can be made, pre-tax, until enrollment in Medicare.
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