Most everyone knows about the use of an IRA or 401(k) account for retirement, but I suspect few understand that a Health Savings Account can also be considered an important retirement account.
It has become ingrained in us that we should max out our 401(k) plan or similar workplace defined contribution plan as the best way to save for retirement. This is certainly good advice. However, in recent years, another retirement savings vehicle has come about that might be superior to the 401(k): a Health Savings Account (HSA). Should those health-cost savings plans also be maxed out in a similar fashion?
- The high-deductible health plan you need to qualify for an HSA may be more budget-friendly than it seems because premiums are so low.
- Unlike a Flexible Spending Account, your HSA money is yours forever, and it's portable.
- You can contribute to an HSA until you enroll in Medicare, even when you're not working. However, be sure to check out this pitfall if you continue working past age 65.
- Invest your HSA money; don't just leave it in a savings account.
- Keep receipts for unreimbursed medical expenses since you got your HSA. You can use them to get tax-free funds from your account.
Here's a comprehensive analysis of the Health Savings Account provisions and the best way to utilize an HSA both before and after retirement.