A health savings account is a beneficial tool for retirement planning.
MILLIONS OF AMERICANS either have or are eligible for health savings accounts, but many fail to understand their benefits. Only a quarter of workers say funding their account is a financial priority, according to the 2018 Health Accounts Employee Attitudes Survey from Willis Towers Watson, a global advisory and solutions firm. By not contributing to their accounts, employees are missing out on immediate tax benefits as well as the opportunity to build additional savings for retirement.
"The HSA was created when high-deductible (insurance) plans came about," explains Joseph Conroy, author of "Decades & Decisions: Financial Planning at Any Age," and a financial advisor with advisory firm Synergy Financial Group in Towson, Maryland.
For 2019, individuals who have single health plans with a minimum deductible of $1,350 and a maximum out-of-pocket cost of $6,750 are eligible for an HSA. For those with family health plans, the minimum deductible for eligible policies is $2,700 and the maximum out-of-pocket costs are $13,500.
"The idea is it's a way to pay for health care and not be taxed on it," says Davey Quinn, senior vice president of investment management for United Income, an online financial planning firm.
Money deposited into an HSA is tax deductible. It then grows tax-free and can be withdrawn tax-free to pay for qualified medical expenses. "It's basically what I consider the holy grail of savings accounts," says Dan Mathews, a certified financial planner, CFP Board Ambassador and wealth manager with advisory firm Creative Planning Inc. in Kansas City, Missouri.