Saving for Retirement

Are you looking for easier and more helpful ways to save for retirement other than a workplace contribution plan? A health savings account (HSA) can be used for healthcare costs while you are working and once you retire, most withdrawals are free from tax, you can invest your contributions and use it later and any unused sum at the end of each year rolls over for the duration of your plan. Whether you need to access money from the account tomorrow or in 10 years, it will be there for you without penalty in most circumstances.

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Health Savings Account (HSA) FAQs

This type of health care account is exactly the way it sounds in that it is a savings account for your health. It is similar to that of a flexible spending account for your healthcare costs only your money does not have an expiration date. You can even assign a beneficiary upon your death. You determine the exact amount you would like to contribute each year with a maximum limit established by the government, and you cannot contribute any additional funds once you are both enrolled in Medicare and over 65. It is possible to arrange automatic transfers each month from your paycheck or you can contribute from other financial sources. And you can set up such an account through your health insurance provider or a reputable financial institution.

One of the primary requirements to be eligible for this type of medical account is that you must be signed up for a health insurance plan with a high deductible. It is also essential that you only have one health plan, that you are not claimed as a dependent by anyone else on their tax return and that you do not qualify for Medicare at the time of starting this healthcare account. Anyone can begin contributing at any age. You can choose to do so individually or as a couple. The earlier you start, the better off you will be during the years after retiring.

The benefits of these accounts can be life-saving in your time of medical need. To begin, any contributions you make that are not directly from payroll are tax-deductible and the balance of your medical savings account grows at a tax-free rate. Any withdrawal you make for a medical expense that is considered a qualifying expense at any age is also free from tax. You never have to remove money from the account your entire life if you want to pass it along as an inherited gift.

Your income will be taxed after your contributions. You can invest any amount of your balance into stocks, mutual funds or other investments to help grow your retirement health account. And always keep your receipts for any healthcare expense you pay out of pocket after you have secured the savings account for your health. If you have a surplus later in life, you can be reimbursed for these out-of-pocket expenses at any time.

What are some of the types of Medical Expenses that could be covered?

The following are just some of the medical services for which you can use your tax-free funds without penalty at any time:

  • Dental
  • Vision
  • Co-Payments
  • Deductibles
  • Medicare Premiums
  • Prescriptions
  • Hearing Aids
  • X-Rays
  • Physical Therapy
  • Hospital Visits
  • Walkers and Wheelchairs
  • In-Home Nursing Care
  • Long-Term Care Services
  • Nursing Home Fees
  • Retirement Community Fees
  • Lodging and Meals for Travel Medical Care
  • Long-Term Care Insurance Premiums

Ways to Manage Your Contributions

The best practices for managing these health accounts include to invest your contributions, maximize your contributions and time your withdrawals accordingly. If you choose to invest your funds to increase your returns, be sure to select low-cost, high-quality opportunities. It is also important to try to max out your contributions each year. Depending on the age at which you begin to save, you could potentially save over $1 million for your future medical costs. Keep in mind you can contribute an extra $1,000 annually once you turn 55. Try not to spend your contributions other than those you are required to spend before you max out the plan. This will make life much more manageable in your later years and allow your investment returns to grow as much as possible.

One never truly knows how much money will be necessary to pay for healthcare expenses for the rest of your life. A health savings account is an ideal way to pay for your possible medical expenses once you retire and even before. The money is tax-free and it lowers your taxable income, so what are you waiting for? Open an HSA today and begin planning for your future medical expenses.

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