I am a big fan of Health Savings Accounts, also called HSAs. So much so that my wife had to kindly ask me not to submit my application to update my license plate to read “HSA4EVR”. Now that might be a slight exaggeration, but what is not an exaggeration is how powerful these accounts can be for your financial plan.
HSAs are often described as being “triple tax advantaged”. Those tax benefits include: first, for those eligible to make contributions, you can do so and take a tax deduction in the same year. Second, funds in the HSA can be invested, and any growth inside of the account remains tax deferred. And third, any distributions from the account are tax-free as long as they are used for qualified medical expenses. It’s the combination of all three of these tax benefits that makes HSAs unique and stand out from other types of accounts such as IRAs or Roth IRAs.
But wait there’s more! Once you turn 65 an HSA turns into a great retirement planning tool as well. After 65, you can now take money out of your HSA and spend on things not medically related and just pay income tax on those distributions, no penalties. In other words, you can still take the money out tax free for medical expenses OR treat the account like an IRA where you are simply taxed for those distributions that are used for non-medical purposes.
If you have questions and want to know if a Health Savings Account is right for you, or want to make sure you are maximizing the benefits of an existing HSA, please don’t hesitate to contact your team at Stonegate!
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.