Many Americans look forward to their golden retirement years, but it takes a great deal of planning and saving to make the dream a reality. Health Savings Accounts (HSAs) have become a common vehicle to pay for out of pocket medical expenses. But to fully unlock your HSA benefits, you should understand how it can be a financial planning tool.  You may be surprised to find your HSA can help you achieve your financial goals.

Tax Benefits

Let’s start with the tax benefits of these accounts.  HSAs provide three substantial tax benefits that other retirement savings options cannot provide. 

1. Your HSA contributions are not taxed.  Your contributions are tax-deductible, or if your employer withholds deductions from your paycheck, your contributions are taken before taxes are calculated. 

2. You don’t pay taxes on any interest earned in your HSA. 

3. You may make tax-free withdrawals for qualified medical expenses.  These benefits draw many individuals to HSAs, but there are more hidden benefits to discover.

Penalty-Free Distributions

At age 65, you may take penalty-free distributions from your account for any reason, but you may also take tax-free and penalty-free distributions from your account for qualified medical expenses and health insurance premiums.  That is a huge advantage over other retirement vehicles like 401(k) plans. 

On average, Americans face higher out of pocket medical expenses after age 65, but with your HSA, you can pay these expenses with tax-free dollars.  Further, you can use your HSA funds to pay for Medicare parts A, B, D, and Medicare HMO premiums. 


You may know about investment options available in your 401(k) or IRA, but do you know what investment options are available for your HSA account?  Many HSA custodians offer a wide range of investment options, and you may see your HSA balance grow through wise investing. 

If you are able to tolerate the financial risk, then you may want to explore how your HSA dollars can grow for you.  Ask your HSA administrator or employer if investment options are available to you, and your financial planner can help you create the right investment strategy for your financial plan.

They don’t call them the golden years for nothing. The more you prepare your finances now and make smart decisions with your HSA, the more likely you are to have a retirement that’s truly golden.

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