Key Takeaways
\nWith a health savings account (HSA) can be used as a long-term savings account.HSAs come with triple-tax benefits that can be used to increase retirement savings.After age 65, maximizing the tax benefits of HSAs can supersede the retirement savings benefits of both IRAs and 401(k)s with tax-free withdrawals for qualifying medical expenses.For 2025, you can contribute up to $8,550 for family coverage and up to $4,300 for self coverage. For 2026, those numbers are $8,750 and $4,400, respectively.If you’re 55 or older, you can contribute an additional $1,000 to an HSA.<\/p>\n
An account for medical expenses probably isn\u2019t what comes to mind when you’re thinking about retirement. Health savings accounts (HSAs), however, offer numerous tax benefits. They’re worth a second look.\n<\/p>\n
The Triple-Tax Advantage of HSAs <\/p>\n
If you’re like most people, you see an HSA as an account to cover medical expenses and nothing more. That’s a shame, because these accounts come with triple-tax benefits that can supercharge your retirement savings and transform your HSA into an indirect retirement account:\n<\/p>\n
Contributions to your HSA are pretax<\/a> and tax-deductible<\/a>. You can deduct them on your tax return<\/a> at the end of the tax year<\/a>, even if you don\u2019t itemize your deductions. Important<\/p>\n You can only open and actively contribute an HSA if you have a high-deductible health insurance plan<\/a>. If you switch plans in the future, you still have the HSA and can use the money in it, but you can’t actively contribute.<\/p>\n \u00a0Tax Benefit of HSAs Tax-deductible contributions Tax-free earnings Tax-free withdrawals Why HSAs Beat 401(k)s and IRAs After Age 65 <\/p>\n HSAs carry numerous tax benefits not provided by 401(k)s<\/a> and individual retirement accounts (IRAs)<\/a>, especially for Americans who are trying to supplement their retirement savings.\n<\/p>\n How can this be true? Well, for starters, the contributions and earnings in IRAs<\/a> and 401(k)s<\/a> are taxed. (Contributions to Roth accounts are made with after-tax dollars, and upon withdrawal, traditional accounts’ contributions and earnings are taxed.)\n<\/p>\n In addition, there’s a minimum age for penalty-free withdrawals: 59 \u00bd. With an HSA, on the other hand, you can withdraw funds at any age without penalty as long as you use those funds to pay for qualifying healthcare purchases.\u00a0<\/p>\n Important<\/p>\n When you turn 65, you can withdraw funds from an HSA for any purpose without penalty. If you use the funds for non-qualifying expenses, however, the withdrawal will be taxed as income.<\/p>\n How To Maximize Your HSA’s Retirement Potential <\/p>\n Be strategic about how you mobilize your HSA as you plan for your financial future. Here are some ways to increase your HSA\u2019s retirement potential:\n<\/p>\n Plan for future healthcare expenses. Set aside contributions to your HSA for withdrawal at a later time.Treat your HSA as a supplemental retirement account, since qualifying medical expense withdrawals made after age 65 are tax-free.Contribute more to your HSA upfront to reap the tax-deductible rewards, then double up with tax-free withdrawals down the road. And don\u2019t forget: there’s tax-free growth along the way.<\/p>\n","protected":false},"excerpt":{"rendered":"Key Takeaways With a health savings account (HSA) can be used as a long-term savings account.HSAs come with…\n","protected":false},"author":2,"featured_media":317636,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":{"0":"post-317635","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/317635","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=317635"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/317635\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/317636"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=317635"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=317635"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=317635"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nInterest and other earnings grow in your HSA tax-free.
\nUp to age 65, withdrawals from your HSA are tax-free as long as they’re used for qualifying healthcare expenses.\u00a0If you use the funds for anything else, the withdrawal is taxed as income and you must pay a 20% penalty. After age 65, all withdrawals are penalty-free, but withdrawals that are used for non-qualifying expenses are taxed as income.<\/p>\n
\nHow to Maximize Retirement Savings<\/p>\n
\nThe money you contribute to your HSA is tax-deductible.<\/p>\n
\nAny growth or earnings of the amount of money in your HSA won\u2019t be taxed, which is unlike the way growth of other savings accounts are typically treated.\u00a0<\/p>\n
\nIf you make a withdrawal from your HSA to use towards a qualifying medical expense, then the amount withdrawn will be tax-free.<\/p>\n