How to Save for Retirement With a Health Savings Account
High deductible health insurance plans are nothing special. If you have one, you may already be spending thousands of dollars out of your pocket on healthcare every year. Before the deductible is paid, it can be difficult to afford the essentials. Unfortunately, these plans have become the preferred option for many large companies, and this costly trend is likely to continue.
However, high deductible plans can offer one benefit: the ability to contribute to a health savings account , which allows you or your employer to save money before tax on medical expenses. These bills may not be enough to offset your medical bills, especially if you are chronically ill, but you can save money by taking a tax deduction for your premiums.
While most people spend their health savings account balances every year , you have the option to roll over the money for as many years as you like and take it with you when you change jobs. There is no deadline for spending the balance, and you can reimburse qualified medical expenses at any time – even years later – if you keep your receipts.
Another lesser known strategy is the ability to use your health savings account for retirement savings. If you don’t spend the remainder every year, you have the option to invest it. The benefits of this tactic are twofold: you can raise money without paying taxes and withdraw it at any time (without paying a fine!) For medical expenses.
When you turn 65, you will have even more options for your health savings account. Once you reach this age, you can withdraw money from your savings account without penalty for any purpose, including healthcare or other living expenses. This makes your health savings account something of a Roth health care IRA — only better because it offers three ways to save on taxes. Your Health Savings Account offers tax deduction for contributions, tax-free growth, and tax-free withdrawals.