When planning for retirement, people often forget to include the cost of healthcare which can be a significant expense. Opening a Health Savings Account can help those planning for retirement also plan how to pay for their healthcare as well. Keep in mind there are certain qualifications for eligibility. Here are 5 reasons to open an HSA:
- Tax-Free Money
Contributions to a Health Savings Account are tax-free. This means when spent on qualified medical expenses, there are no taxes due.
- Tax-Free Growth
The growth earned on HSA contributions is also tax-free. The money stays in the account until used to pay for healthcare expenses. Contrary to popular beliefs you CAN use your HSA to invest partner with your IRA in alternative investments.
- Personally Owned
The owner of the Health Savings Account owns the money in it, making using the money for healthcare a lot easier. In addition, if the account owner changes jobs or loses their health insurance, the Health Savings Account remains intact. The money remains in the account and can be added to either by the individual or by a new employer.
Although there is a limit on annual contributions, there is no overall limit on how much money can be in the Health Savings Account. Any unused money in the account at the end of a year rolls over and continues to accumulate. In addition, after the age of 65, the funds in a Health Savings Account can be withdrawn for any purpose, penalty-free. Prior to 65 years of age, there can be income taxes due on money taken for something other than medical expenses.
- Reduce Stress
Having some control over paying for healthcare expenses can give account holders peace of mind. They know where their healthcare finances are coming from, which takes away some financial concerns in retirement.