#QUALIFIED MEDICAL EXPENSES PLUS#
#QUALIFIED MEDICAL EXPENSES FREE#

If you choose to keep funds earmarked for deductibles in your HSA, make sure it isn’t invested in tradable securities.ĭuring a market downturn, you might be forced to sell shares of any mutual funds or stocks you own at a loss in order to pay for medical care.

#QUALIFIED MEDICAL EXPENSES FREE#

Your HSA offers tax free growth, so keeping the money in your HSA invested, but increasing your emergency fund to cover your deductible is likely to net you the most over your lifetime. Save the money in your HSA or in a high-yield savings account. Since HSAs are only available with high-deductible health plans, you need to make sure you have enough cash on hand to pay your higher deductibles when you need medical care. Reserve Enough Cash to Cover Your Deductibles If you choose to use your HSA to save for retirement, follow these tips to ensure you’re getting the most out of your account.

#QUALIFIED MEDICAL EXPENSES PLUS#

Before you turn 65, though, you must pay income taxes plus a 20% penalty on unqualified withdrawals. If your child breaks their arm skateboarding and you end up with $10,000 in medical bills when you’re 25, but delay reimbursing it until retirement, that $10,000 could grow to $100,000 by the time you retire and you’d still be able to take out the original $10,000 tax-free.īest of all, after you turn 65 you can use the funds for any purpose above and beyond medical expenses if you pay income taxes on the withdrawals. If you choose to delay reimbursing yourself and save your receipts during your working years, that money could grow substantially. And this number will only rise over time as medical costs routinely outpace inflation by multiples. Fidelity has estimated a couple retiring in 2020 would need almost $300,000 to cover medical costs in their golden years. Making regular contributions to an HSA with an eye toward covering medical expenses later in life should be a key part of your retirement plan. Not so with HSAs: You get the tax benefits and you can keep your money invested and working for you indefinitely. They offer similar tax advantages to an HSA, but with an FSA, you have to use the money or lose the money by the end of each year. Health plans with lower deductibles-and lower out-of-pocket costs-offer flexible spending accounts (FSAs). It combines the best tax features of a Roth and a tax-deferred account,” says Brandon Renfro, a certified financial planner and assistant professor of finance at East Texas Baptist University.Īnd like retirement plans, HSAs also let you invest your savings in mutual funds, stocks, exchange traded funds (ETFs) and other securities-which offer better growth potential than a regular savings account. “You aren’t taxed on either end if HSA withdrawals are qualified. Sound familiar? These advantages might remind you of the benefits you get with retirement plans like a 401(k) or an individual retirement account (IRA)-but they’re even better with an HSA, if you use it correctly. Health savings accounts offers a hat trick of tax advantages: Contributions to your account are made pre-tax, lowering your taxable income today investments grow tax free while they’re kept in the account and withdrawals are free of income tax, as long as you use the money for qualified medical expenses.

Money contributed to an HSA not only saves you on taxes now, but will grow into a powerful account worth hundreds of thousands over time that can all be withdrawn tax-free if you follow certain guidelines. The annual HSA contribution limit in 2023 is $3,850 for individuals with self-only coverage and $7,750 for an individual with family coverage. While not all HDHP plans give you access to an HSA, you should strongly consider switching to one if it does. Many high-deductible plans even feature an employer contribution to a health savings account that makes the net deductible after contributions lower than you would have with a traditional low-deductible health plan. Individuals with low annual healthcare costs can benefit from a HDHP plan by saving on premiums but even those with high annual healthcare costs could come out ahead with an HDHP plan as these plans sometimes have a lower out-of-pocket maximum than non high-deductible plans. High-deductible health plans (HDHPs) typically come with lower premiums but a higher deductible than non-HDHP plans. You can invest money stashed in an HSA in mutual funds and stocks, plus it offers valuable tax benefits-all of which make health savings accounts an ideal way to save up for inevitable medical expenses in retirement. Health savings accounts help you set aside money to pay for qualified medical expenses, but did you know an HSA can also be a great tool for retirement planning?

Qualified medical expenses