Health Savings Accounts and Retirement

• Author: Kelly Cooke
• Posted: 2023-12-08

When you consider retirement savings, the first thing you think of is retirement accounts, CDs, pension, and even 401(k) plans. Saving is the ultimate goal when it comes to retirement because often expenses might overrun the funds available for retirees. However, there are other ways that a worker, like yourself, can put away savings for the future years in new and unexpected ways. If you are wondering how, there is one interesting way to save money for things, specifically health and medical expenses, one of the most difficult expenses to meet after retirement. One of the ways you can save up money for medical and health costs both before and after retirement is through a health savings account.

Though these accounts aren’t technically considered retirement accounts, they can still help with things like out-of-pocket medical expenses that are often found with customers that have high-deductibles and high health-care plans. Retirement often leaves funds a little low anyways, so if a medical emergency happens, it is nice to know that you have a backup plan to help you pay for the expenses. There are several planning advisors who are claiming that these accounts or plans are a great way to help save for retirement because of one little thing: a triple tax benefit.

If you are curious about this new savings type, here’s what you need to know about these health savings accounts.

Health savings accounts are tax-deductible, which is helpful in many other ways as well. Perhaps this is why so many people are starting to give health savings accounts a second look. The second feature of these accounts is the money saved can grow to be tax-deferred. This is up to $3,400 for people who have an individual health plan and up to $6,750 for family plans.

This is good news, especially for those who are younger and are trying to save because they often have fewer medical expenses, which dramatically reduces the number of withdrawals. Account holders, should they need to, can withdraw from the HSA funds whenever they might need the funds for qualified medical costs. If you are in a tight spot when it comes to your medical expenses after retirement, then this account can drastically help you get through the tight spots without having to sacrifice much-needed funds.

There’s a bit of a hack for these accounts that can help with finances before retirement even comes around. Account holders often earn rewards for different out-of-pocket medical expenses when they leave their HSA funds untouched. This is only available when a consumer pays for their medical expenses by credit cards instead of the health savings account funds, and it earns them points to use in the future.

Untouched funds in the HSA can also be used as an emergency fund for other things that are non-medical expenses. By hanging on to all of your medical receipts and keeping your account funded, you can submit your receipts when an emergency occurs and receive a reimbursement check for those amounts from your HSA to help pay for that event even if it is non-medical.

Luckily, a health savings account can be used much like an IRA. You can even invest a portion of the funds from your HSA into an IRA. The first step toward achieving this investment is by inquiring how much savings needs to be kept in cash for yourself and how much needs to be invested within your HSA. These funds can even be used at any time for any reason, should an emergency arise where the funds are needed. However, if you choose, you can leave the funds untouched so they can grow within the investment account.

Since it is known that medical expenses rise toward the retirement date of many people, it is a great idea to start considering the health savings account and treating it like an IRA for health care costs and more. Investing is a great way to ensure that you aren’t left with expenses that you can’t pay for after retirement. If you are giving an HSA more thought, you can begin by talking with experts on the subject to ensure that you are making the right decision and are taking the right steps toward starting your own health savings account.