Funding an HSA Could Help Strengthen Your Retirement Strategy

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing how a well-managed health savings account can help you pay current and future medical bills as well as prepare for retirement:

By one estimate, the typical 65-year-old couple who retired in 2021 could spend as much as $296,000 on health-care expenses in retirement.

This figure includes lifetime premiums for Medicare, supplemental insurance, deductibles, coinsurance, and other out-of-pocket costs for medical care and prescription drugs.

The primary purpose of a health savings account (HSA) is for workers to set aside pre-tax income to pay current and future medical expenses not covered by health insurance. This is why HSAs are sometimes called Medical IRAs. They incentivize saving with three powerful tax advantages: (1) the dollars you contribute are deducted from your adjusted gross income, (2) investment earnings compound tax-free inside the HSA, and (3) withdrawals are untaxed if the money is spent on qualified health-care expenses. (Depending on the state, HSA contributions and earnings may or may not be subject to state taxes.)

Another benefit is that account funds not needed for health expenses are available for any other purpose after you reach age 65. When HSA money is spent on anything other than qualified medical expenses, withdrawals are taxed as ordinary income, but they don’t…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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