Health Savings Accounts are reshaping the way we think about saving for retirement. They are said to be triple tax advantaged. And when you consider the average couple will spend $280,000 on health care in retirement, the HSA should be in our plans.
Video: Health Savings Accounts
Where does the $280,000 go?You may think the $280,000 figure would include things like Medicare supplements or even the costs for a nursing home stay. Not according to Fidelity. This figure covers the bare minimum as shown in the graph below.
Plan for A Better Retirement
We created Monday Morning Money with one goal in mind. Give you information to inspire you to plan for a better retirement.
We publish a new episode each week. And, we will deliver it right to your inbox.
Don’t miss an episode, subscribe today!
Health Care Costs in RetirementThe average couple will spend over $280,000 on health care in retirement. Those costs include:
- medicare part b and part d premiums
- Costs for prescriptions and,
- the outlays you have for deductibles and co-pays.
The Triple Tax Benefits of Health Savings AccountsConsider this.
- A health savings account allows you to accumulate money on a tax deferred basis,
- It’s funded by tax deductible contributions,
- And distributions to pay for those qualified health care expenses are not taxed.
- co-pays and deductibles.
- and even your medicare premiums
- long term care insurance.
- eye doctor and eye glasses, and
- dental expeneses.
Prioritize Your HSAShift your saving strategy. For years, people would try to maximize their retirement plans or IRA contributions. Consider shifting some of those savings to your HSA. You want to maximize the employer matching contributions in your 401(k). But it may be worth it to shift some of your savings to maximize your HSA contributions.
Conserve Your Health Savings AccountPay for your current small medical expenses from other accounts. You can use the health savings account for those qualified medical expenses. But don’t use it to pay for that $5 generic drug, the $25 office co-pay, or even the $150 dental visit. By spending less from that account, it will help your balance grow faster.
Pursue Long Term GrowthInvest it. I have an HSA account. My provider allows the participants to open an investment account to pursue long term growth. Be careful though. Your provider may have service fees if your primary HSA checking account falls below a certain level. Make sure you know their rules. The triple tax benefits of :
- deductible contributions,
- tax deferred growth,
- and tax free distributions for qualified medical expenses