Turbo Charge Your Retirement Savings with an HSA

October 31st, 2021 at 8:27 AM

You probably think of a Health Savings Account (HSA) as simply an account to put aside funds for medical expenses--think again-in this brief article you will see that the HSA provides MORE tax  benefits than an IRA.

To contribute to an HSA you must have a high deductible health plan. For 2022, a high-deductible health plan is a plan with an annual deductible of at least $1400 for self-only coverage, or at least $2800 for family coverage. Additionally, the maximum annual out-of-pocket expenses the high-deductible plan can require you to pay are $7,050 for self-only coverage, and $14,100 for family coverage.

The HSA and the IRA are similar in that you qualify for a tax deduction when you contribute....the IRA has certain qualifications and income limits; the HSA has no such qualifications, other than mentioned above, and no income phase-out limits.

Advantages of the HSA over the Traditional IRA

With the HSA, you can potentially avoid taxes forever on any and all withdrawals--not so with the IRA-you get taxed on the back end when you withdraw the funds. HSA funds can be withdrawn at any time free of taxes to use for qualified medical expenses; and at 65 other benefits kick-in. HSA funds within the plan accumulate tax-free over the years as well. IRA funds must also start to be withdrawn at age 70 1/2--not so with the HSA.

Therefore, there are several features of the HSA that makes this a better choice for retirement....using the funds at ANYTIME for medical expenses with zreo taxes & zero penalties.....at 65 you can use these funds tax-free for health insurance premiums, including medicare.....also, no minimum required distributions (RMD\\\'s)...also, 1 more goodie--at age 65 you may use the funds for vacations!

Mark S. Fineberg, CPA