Health Savings Accounts (HSAs) are a relatively new way to save for out of pocket health expenses. While they can be used prior to the age of 65 only for medical expenses that are carried out of pocket, there are some interesting options that an HSA provides for retirees that might make investing in one before retirement a good option.

Tax Deferred Savings

All contributions to an HSA are made pre-tax. That means the amount that you donate to the savings account is subtracted before your wages are taxed. Using the HSA is tax free as long as the money that is withdrawn from the account is used to cover out of pocket medical expenses. This can include anything from doctor co-pays to medications. The IRS caps the amount that can be contributed to the account at a yearly maximum. However, the account can be used like a 401k or other retirement account in that the saved money can be invested in mutual funds or other interest bearing options.

After Retirement

While there are restrictions on what the money can be withdrawn for prior to age 65, after the age of 65 there are no restrictions on what the money can be used for. An HSA account also doesn’t carry the mandatory withdrawals that other retirement accounts do. This can make the HSA an excellent option as a backup retirement account for costs other than out of pocket medical expenses.

Contact Stano Law Group for assistance with elder law or estate planning questions.