4 Ways to Maximize Your HSA Retirement Strategy

You’ve probably heard of health savings accounts, or HSAs.

You can use these accounts to pay medical expenses if you have a specific type of health plan with high out-of-pocket costs.

But with sweet tax advantages, HSAs can also be a smart way to save for future medical expenses in retirement. Think of it like a 401(k) for health care costs.

We’ll dive into four specific ways you can use an HSA to achieve your retirement planning goals. But first, here’s a quick rundown of how HSAs work, including tax benefits and other key advantages.

What is a Health Savings Account?

A health savings account (HSA) is a tax-advantaged account you can use to pay for medical expenses.

You — not your employer or insurance company — own and control the funds in your HSA.

There were about 30 million active HSAs as of June 2021 — about five times more than in 2011, according to Devenir, an HSA provider. The company estimates that almost 1 in 5 Americans in their 30s has a health savings account.

Most people use their HSA to pay for medical expenses not covered by a high-deductible health plan (HDHP), such as copays at the doctor’s office and other qualified medical expenses.

But with attractive tax benefits and flexibility, health savings accounts can also be an ideal long-term investment vehicle for retirement.

​​Instead of withdrawing money from your HSA each time a medical expense arises, experts recommend paying for medical costs out of pocket and letting the money in your HSA continue to grow.

Who Can Open an HSA?

You must be enrolled in a high-deductible health plan with no additional health coverage to contribute money to an HSA.

However, not all high-deductible health plans are HSA-eligible, so check with your insurer or HR department to ensure your plan qualifies.

HSA Contribution…