Opening An HSA Today Can Help Keep Retirement Healthcare Expenses At Bay
There are many expenses to consider when planning for retirement but none that inflate as fast as healthcare expenses. Healthcare is likely going to be one of your largest expenses in retirement; Fidelity estimates that the average couple age 65 in 2020 will need $259,000 saved in today’s dollars for medical expenses.
There is one type of tax-advantaged account that can help you save and prepare for these expenses: A Health Savings Account (HSA). HSAs are funded by pre-tax salary reductions or direct contributions; and many employers offer to fully or partially fund these accounts each year as a benefit of your employment
Health Savings Account (HSA)
In order to be eligible for an HSA you must have a High Deductible Healthcare Plan (HDHP). As of 2020, a plan is considered a high deductible plan if the deductible is at least $1,400 for an individual and $2,800 for a family. HSA accounts are meant to provide tax savings on qualified medical expenses; they can be invested in the stock or bond market for growth and income, and to help protect against inflation. Contributions to an HSA are tax-free, the earnings grow tax-free, and the distributions are tax-free when used to pay for qualified medical expenses.
· You can contribute up to $3,600 for an individual or $7,200 for a family
· If you’re 55 or older, you can put in an extra $1,000 in catch up contributions
· No use-it-or-lose-it provision
· Can be used as retirement health care expense savings
· You keep your account if you switch jobs