3 HSA Benefits You Don’t Want to Miss After Retirement


HSA is not strictly speaking a retirement savings plan. Rather, it’s an account designed to help you save on medical bills and enjoy tax benefits when paying.

IRAs and 401(k)s, on the other hand, are accounts specifically designed for retirees. If you fund any of these plans, you are not even allowed to withdraw before age 59 1/2 and will be penalized if you do.

However, while ensuring that you have access to your HSA money before retirement, it is beneficial to set aside those funds for your retirement. Then you may be able to enjoy these benefits.

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1. Tax exempt investment income

Unused money in HSA doesn’t have to sit there. You can grow your capital by investing your HSA funds in the same way you invest in an IRA or 401(k).

But the beauty of HSA is that it provides a tax-free investment return. In this respect, it is similar to the Roth IRA and 401(k), which are popular savings plans due to this feature.

Imagine that you donated $40,000 to HSA in your lifetime and your investment brings your balance to $75,000. That’s a tax avoidable profit of $35,000, which is a pretty good deal.

2. Tax-free withdrawal of medical expenses

Many seniors find medical bills to be one of their biggest retirement expenses. It may even end up being the single largest amount above the amount you spend on housing.

The nice thing about having money in HSA is that medical withdrawals are tax-free. Given that some other sources of retirement income, such as traditional IRAs, 401(k) withdrawals, and possibly Social Security, are taxable, it’s great to reap the benefits.

3. You’ll be more flexible with your money when you’re 65

Just as penalties apply to withdrawing funds early from an IRA or 401(k), penalties apply to tapping HSA for non-medical withdrawals. However, this is limited to age 65.

Once you turn 65, you can withdraw your HSA without penalty for any reason. The only thing that will happen in this case is that you will pay taxes on the amount you withdraw, much like her traditional IRA or 401(k) withdrawals are taxed at retirement.

Still, it’s nice to have that flexibility. Some people will eventually need his entire HSA balance to pay for medical expenses in retirement, but if he doesn’t run into many medical problems later in life and chooses a wise Medicare plan, his HSA balance will be. can be redundant. But don’t worry, it won’t go to waste. You can use that money for everything from paying your utility bills to paying for entertainment.

HSA is not a retirement account in the classical sense, but it is in your best interest to treat it as such. Because you may actually enjoy all these benefits after your career is over.

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