Lower Healthcare Costs and Boost Retirement Savings with an HSA
August 1, 2016 in Monday on the Money
To alleviate the rising cost of health insurance, many employers and individuals are switching to high deductible health plans, which offer lower premiums. Whether you like them or not, Money Magazine says almost half of employers plan to make high deductible plans the sole choice for their employees by 2018. Health Savings Accounts, commonly referred to as HSAs can help alleviate the high up-front cost of healthcare that accompanies these plans. And less widely known, HSAs can be a great way to supplement your retirement savings.
HSAs allow people with high-deductible health insurance policies to save money tax-free for medical expenses. As the New York Times recently reported, HSAs “offer a rare, triple-tax benefit” because the money goes in tax-free, grows tax-free, and is withdrawn tax-free, so long as it is spent on eligible medical costs, or you are over age 65. That’s right. Funds can be withdrawn from an HSA for any purpose without penalty after age 65, and this, combined with the fact that unused funds carry over from year to year, makes it a great additional retirement savings vehicle.
To qualify for an HSA in 2016, you must be enrolled in a health insurance plan with at least a $1,300 deductible for individuals or a $2,600 deductible for families and an out-of-pocket maximum of no more than $6,550 for individuals or $13,100 for families. If that sounds like you, consider opening an HSA so you can use these tax advantages to add to your retirement nest egg and lower your overall healthcare costs. You wouldn’t save for retirement without using an IRA or 401k, so don’t save for medical expenses without using an HSA, particularly since it’s a way to save for your future too.
By Adam Lucas Adam Lucas holds a Finance degree and an MBA from the University of Kentucky. His work has appeared in many major outlets including Yahoo, AARP.org, and GoBankingRates.com.
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