A well-known, common retirement savings vehicle is the 401(k). This account allows future retirees to set aside money in a tax-advantaged way to pay for expenses in retirement. But will this 401(k) be enough for most people to pay for retirement PLUS their healthcare expenses?
Enter the HSA, or Health Savings Account. Sure, you will have Medicare most likely, but that often isn’t enough for many. Co-pays, prescriptions, and deductibles are often beyond the coverage of Medicare, necessitating additional ways to bridge the gap.
With an HSA, you may save tax-deferred, just like with your 401(k). However, with the HSA you may use the money any time in your life, so long as it goes towards a qualified medical expense. What you don’t use you save, tax-deferred, for the future.
Your HSA is triple-tax advantaged. This means funds are contributed pre-tax. In addition, these funds grow tax-deferred. Finally, you can withdraw the funds tax-free when you need them.
Be sure to look into whether or not you quality for an HSA. It may be the perfect companion to your 401(k), both now and as you get closer to retirement.