How Can You Use Your Health Savings Account (HSA) For Your Retirement?
In the past few years, a lot of new retirement savings schemes have been launched in the market. One of them is a health savings account (HSA) that helps in paying for a long-term care insurance and medical expenses for retirement years. The best part of this plan is that it provides tax benefits to a person. This plan is the best option for those who have got high-deductible health schemes for paying “out of pocket” medical expenses. To effectively reap the benefits of this plan, you need to learn about the right way to use it.
Why should employees use an HSA for Retirement?
The triple tax advantage of HSA investments makes it the best way to save for retirement. As per a recent story published in “The Wall Street Journal”, Health Saving Accounts are “the most tax preferred saving account available in the US.” Use of this scheme to save for medical expenses incurred on retirement is better than other retirement accounts.”
What are those factors that make an HSA good retirement option to be considered?
HSA is a budget friendly option when compared to other retirement options. It provides an easy and robust way to fund retirement of a person. When compared with other retirement plans, HSA provides several attractive and useful features that make it an ideal option for people.
- All the contributions that you make to your HSA plan can be made through payroll deductions, and from other forms of your savings. Any contributions that are made by your employer is not counted as your taxable income.
- One of the best parts of this account is that the balance of the account grows in a tax-free manner. Any type of dividends, interest, or capital gains that are earned are not subjected to tax.
- Any type of withdrawal done for qualified medical expense is completely tax-free. This makes HSA superior to other conventional retirement scheme like IRA or 401(k). An HSA scheme does not require the account-holder to begin funds withdrawal at a specific age. You can keep this account untouched for any period of time. You will not be permitted to contribute once you reach the age of 65 years.
- As HSA belongs to the investor and not the employer. So, this account remains active even if the investor changes his job. This implies that the account is completely portable and goes everywhere with you.
Who are eligible to open an HSA?
To qualify for opening an HSA on your name, you need to fulfill a set of eligibility criteria. It must be a “high-deductible health scheme” and not any other type of health insurance/ Medicare. Also, you must not be a dependent on tax return of someone else.
Consumers who meet the eligibility criteria for this saving account but have not opened one on their name are losing an incredible opportunity to fund their later years. HSA money is a great advantage for all investors as it provides the tax exemption on all withdrawals made to this fund. By providing highest tax value it is the most affordable means to fund medical expenses.