A Health Savings Account is an appealing and smart vehicle to help you save for your future healthcare expenses and specifically for your retirement. According to Census Bureau data, the typical household that earns less than $67,200 a year has no retirement savings. And even more surprising, across all income levels, at least 50 percent of Americans are at risk of not having enough money to maintain their current standard of living in retirement. According to Fidelity Investments, an average 65 year old couple retiring today will need $285,000 to cover health care and medical costs in retirement.
Saving for retirement is often an overwhelming feat and the simplicity of a Health Savings Account can be a great solution. An HSA is a consumer-driven approach with a triple-tax advantage. What does triple-tax advantage mean? Your contributions are not subject to federal income taxes, your earnings from interest and investments are tax-free, and distributions used to pay for eligible medical expenses are tax-free.
An HSA has the same tax advantages of a 401(k) and allows you to take funds out of the account to pay for past (as of the date the account was opened) or future healthcare expenses. If you need the funds during retirement, unlike a 401(k), you can withdraw funds to use on eligible medical expenses and avoid paying taxes on the funds. Once you reach age 65, if you decide you need to withdraw the funds and choose to not use them on eligible medical expenses, you can still do so, and pay the income taxes, similar to a 401(k).
Saving for your retirement is no joke. It is much easier to save for a new home or a family vacation, however, don’t let your adventurous side keep you from saving for your future. Invest in yourself by choosing a Health Savings Account as a solution to take control of your retirement savings.