How An HSA Can Be A Lifesaver In Retirement Planning

June 16, 2021

There’s little not to like about a Health Savings Account (HSA). They allow you to invest and withdraw money for health care expenses. The contributions and proceeds are tax free (if used for a wide range of medical/health expenses).

You can sock away quite a bit of money annually in an HSA: For 2021, the annual cap on HSAs will be $3,600 for self-only and $7,200 for family coverage. Better yet, if you don’t use the money, you can keep it.

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Not surprisingly, HSAs are becoming more popular, even during the pandemic. According to a Bank of America
BAC
study of customers using the plans, “average balances in HSAs increased 17% in 2020, with employee contributions jumping 10%. Also, 35% of HSA balances were saved for future use, which is 25% higher than the national average.”

One of the best features of an HSA is that you can use the savings for anything, but if you don’t tap the accounts for health-related expenses, you’ll pay income tax on the withdrawals. Still, it’s a great way to supplement your retirement savings while covering out-of-pocket health expenses.