Key Takeaways
- Health Savings Accounts (HSAs) are tax deductible, tax deferred, and tax-free when used for health or medical-related expenses.
- Many people don’t realize HSA funds may be used for retirement.
- Once you’ve reached your limit on 401(k) contributions, your HSA may be an option for additional retirement savings.
If you’ve ever done a load of laundry and found a $20 bill in a pair of pants, you know what a great feeling that can be. It’s money you’d forgotten about, and here it is, appearing in an unexpected place! Pretty cool!
Well, finding money in unexpected places is even more exciting when it’s on a bigger scale and can be used for retirement savings. If you think you’ve done everything possible to save for retirement, but haven’t heard of Health Savings Accounts (HSAs), you may want to look into them.
HSAs are accounts you may qualify for if you’re enrolled in a high-deductible health insurance plan. (If your insurance program doesn’t offer one, you may be able to open a separate HSA at a financial institution.) They are tax deductible, tax deferred savings plans, and the funds are tax free when used towards medical expenses.
You decide how much to contribute to your HSA, and for 2022, individuals may contribute up to $3,650, and families may contribute up to $7,300 per year. For those 55 and older, there’s a catch-up contribution which allows an additional contribution of $1,000 per year.
HSA funds roll over from year to year, unlike “use it or lose it” Flexible Spending Account. This means you never have to worry whether you’re contributing more than your medical expenses will require each year. In fact, any additional funds become a supplemental retirement account. Found money!
So if you’re in a situation where you’re trying to increase your retirement savings on a tax deductible basis, and you’ve reached your limit on your 401(k), consider an HSA. Check with your employer and see if an HSA is an option to grow your retirement savings even more. Until next time, enjoy.
Gary
If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy:
