The Retirement Account You’re Probably Overlooking
You have a great job and a good salary. You also have a 401(k) and a traditional IRA.
Each year, you contribute to your retirement accounts the maximum amount allowed.
It seems like you’re doing everything “right” when it comes to retirement planning.
However, there’s another kind of retirement account that is overlooked. Most people are unaware of its benefits. Or, if they have such an account, they’re not taking full advantage of it.
It’s called a Health Savings Account, or HSA for short.
Let’s talk about how an HSA works.
What is an HSA?
A Health Savings Account is a tax-advantaged savings account designed for healthcare expenses. And here’s why an HSA is so attractive: it offers a “triple tax advantage” that no other account can match. Specifically:
- Contributions to your HSA are tax-deductible (or pre-tax if through payroll)
- Growth is tax-free
- Withdrawals for qualified medical expenses are tax-free
Think about that for a moment. Your money goes in tax-free. It grows tax-free. And it comes out tax-free (for qualified medical expenses).
Who can have an HSA?
Not everyone is eligible. To contribute to an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP).
You also cannot:
- Be enrolled in Medicare
- Be claimed as a dependent on someone else’s tax return
- Have other health coverage that disqualifies you (like a traditional health plan or general-purpose FSA)
How does an HSA function as a stealth retirement account?
If your income allows you to pay medical expenses out of pocket, do it. Leave your HSA money invested, and let it grow tax-free for decades.
The IRS doesn’t require you to withdraw money from your HSA in the same year you incur the medical expense. As long as the expense happened after you opened your HSA, you can reimburse yourself years – even decades – later.
This means:
- Paying for medical expenses out of pocket today
- Saving all your receipts (You must have proof of these expenses.)
- Letting your HSA grow tax-free
- Reimbursing yourself tax-free in retirement for those old expenses
What’s the bottom line?
Your HSA can function as a retirement account disguised as a healthcare account.
Want to find out more?
At Meriwether, we help clients integrate HSAs into their comprehensive retirement strategies. We show them how to maximize the triple tax advantage and coordinate HSA usage with their other retirement accounts.
We do this because we believe smart tax planning can make a meaningful difference in how much wealth you keep.
If you have access to an HSA and want to ensure you’re using it optimally, let’s talk.
This content is for educational purposes only and should not be considered personalized financial advice. Please consult with a qualified financial professional to discuss your specific situation and needs.