4 Reasons to Open a Health Savings Account

Retirement

4 Reasons to Open a Health Savings Account

Posted by RDW Financial Group
2 years ago | October 16, 2017

For many of us, rising health insurance premiums are just one obstacle we face. Some of you might be enrolled in a plan with a high deductible, which isn’t necessarily a terrible idea since this choice can keep your premiums lower. However, in the event you need to meet that deductible, your checking account can take a hit, and even if you don’t have a problem meeting your deductible, you might be overlooking a valuable savings opportunity.

According to the Employee Benefits Research Institute, workers preparing for retirement should pay particular attention to health savings accounts. This type of account offers several important benefits to anyone who is eligible to open one, but can be particularly helpful as you work toward your target retirement date.

Three tax advantages. A health savings account is a tax-advantaged account, offering three distinct opportunities:

  • Funds go into the account, free of taxes, via direct contributions from your paycheck. This lowers your overall taxable income for the year.
  • Your money in the account accumulates interest free of taxes.
  • You can withdraw cash, free of taxes, to pay for qualified health care expenses.

An HSA also functions as a retirement savings vehicle. Let’s assume that you don’t actually use the money in your HSA each year. You don’t lose the funds! They can be rolled over to the next year, and to the next, all the way into retirement, while offering the same tax advantages throughout this time.

Essentially, a health savings account can also be used to save money for qualified health expenses in retirement. You can use the money for Medicare premiums, dental care, vision care, co-pays, medications, or even nursing home expenses.

Since most of us will experience more health problems (and therefore expenses) in retirement, saving money in a tax-advantaged account is not an opportunity you want to overlook. But since you can’t open an HSA once you’ve signed up for Social Security or Medicare, the time to do so is now. Give us a call to discuss health savings accounts or other retirement funding options that might benefit you.

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