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HSA's Banana Split With Cherry on Top

HSA's Banana Split With Cherry on Top

| October 31, 2017

HSAs: Banana Split with Cherry on Top of Savings Vehicles - No Kidding!

These savings vehicles are not given near enough attention by employees. In retirement, it can serve as asubstantialsavings account tappedtax freefor health care expenses. How?

  • Age 45 to 55: Family maxes out their contributions to their HSA (currently $6,750/year)
  • Age 55 to 65: They contribute an additional $1,000 catchup or $7,750/year
  • Leave account untouched allowing it to grow and compound year to year
  • Pay for out of pocket health care expenses via their regular income during those 20 years
  • At age 65, they could have accumulated $185,133 (earning 3%/year). Distributions are now:
    • tax free for qualifying health care expenses or
    • taxable (no penalties) for any expenses they desire after age 65

These savings vehicles require your participation in a high deductible health care plan. Some features:

  • Pre-tax contributionsvia payroll
  • Tax deferred compoundingof earnings and contributions
  • Investment optionsoften include money markets and mutual funds
  • Roll year to yearand stay with you not your employer - no "use it or lose it"

Like I said, a banana split with the cherry on top!