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February 04, 2008
Health Savings Accounts Can Be A Healthy Aid To Retirement
The Wall Street Journal has finally reported something we have been saying for years. Tax-advantaged Health Savings Accounts (HSAs) can be used to supplement traditional retirement accounts.
An HSA can provide a valuable source of retirement income alongside your 401(k) and individual retirement account if you let your funds grow, says the Journal:
You can fund your HSA with pretax or tax-deductible dollars, which then grow tax-free; any withdrawals you make to pay for HSA qualified medical expenses aren't taxed either.
Money in Health Savings Accounts can be invested in stocks, bonds, mutual funds and certificates of deposit.
Further, individuals who are 55 and older can make additional "catch-up" contributions to HSAs of $900 in 2008, and $1,000 in 2009 and thereafter.
Once you turn 65, distributions for nonmedical expenses are only taxed as ordinary income.
Another advantage to HSAs is that unlike an Individual Retirement Account -- where you are required to make mandatory distributions at age 70 ½ -- there are no time constraints on HSA withdrawals.
Moreover, your HSA dollars can fund other aspects of your retirement, says the Journal.
Posted by Wiley Long at February 4, 2008 10:40 AM
Comments
It’s about time the Journal mentioned this. Clark Howard has been saying this for a long time. I’m hoping that I will never need so much medical care as to drain the whole HSA account. If I do, Thank God that I was able to put this money aside and not have it cost any more than my traditional insurance account. Plus I will have earned interest on it the whole time!
The investment option is a bonus too. I have not yet invested in this way as I want to keep funds in the HSA for medical expenses – without having to convert funds back into cash. But, if all does well, at the end of 2008; I should be investing a sum of money into some type of fund. I started my HSA in 2007 and was able to max it out. If the same holds true for 2008, I will have around $6,000 to invest while still having several thousand in the HSA for normal medical bills. Extend this out over the next 30 years until my retirement “age”, I should have a bundle of money.
This all depends on the healthcare issues in Government and me and my family’s personal health status. If we have a lot of health issues, I will not have a lot of funds to transfer but I will still be equal to or ahead of my old traditional health insurance (assuming 2006 costs). If the government changes the law and no longer allows me to have a HSA, that also will cause me to find another way to invest money.
Keep up the good work.
Jeff
Posted by: Jeff at February 5, 2008 10:28 PM