HSAs are often seen as health savings tool and they should be. However, HSA can provide deep financial flexibility and benefits, that are not only comparable to IRAs & 401ks, but that might even exceed those traditional retirement savings vehicles. Here is what you should know about HSAs, taxes & retirement.

Tax Savings

We love to talk about triple tax advantages! HSA benefits include tax-deductible contributions, tax-free interest/investment gains, and tax-free withdrawals (for qualified medical expenses) which means you can use tax-free money from your HSA to pay for health expenses.

With retirement health care costs now expected to exceed $275,000 in out-of-pocket medical expenses, HSAs provide the only way to save and pay for these expenses tax-free. You might be the picture of health today, but contributing to your HSA will increase your health tax benefits and long term savings.

Catch-Up Contributions

In 2017, HSA-eligible plans have a maximum annual contribution limit of $3,400 for single coverage and $6,750 for family coverage. But that doesn’t mean you need to stop, you might be eligible to contribute more tax-free dollars. Remember – a little can go a long way.

After the age of 55, individuals can contribute an additional $1,000/year, as long as they qualify and are not signed up for Medicare. Under those same conditions, if you and your spouse are over the age of 55, you can each contribute $1,000 more/year. You can see full details and qualifications here. These age qualifying contributions allow you (and your spouse) to further grow your HSA savings.

The Magic HSA Birthday: 65 Years of Age

After the age of 65, the value of an HSA greatly expands because it becomes eligible for non-health expenses. From a technical standpoint it becomes another savings account – just pay income taxes at that time with no penalty, just like an IRA or 401k if used for non-qualified medical expenses. This creates a unique way to save for health and personal wealth for retirement.

No Mandatory Distributions