By: Trent Westmeyer, VP Retirement Benefits Officer
401(k) Plans and IRAs are great retirement tools, but if you’re looking to diversify your retirement options even further and have a high-deductible health plan, a Health Savings Account (HSA) is a great option for you. A few of the advantages include:
- Contributions are on a pre-tax basis, meaning that they reduce your federal and state income tax liability and they’re not subject to FICA taxes. In addition, any contributions your employer makes do not have to be counted as part of your taxable income. At age 55, HSA owners can make an additional $1,000 catch up contribution.
- Just like your 401(k) and IRA’s, your account balance grows tax-free. Interest, dividends, or capital gains you earn are nontaxable. This is the key to success with HSA retirement planning, earnings growth! Most HSA’s are in low yield money markets.
- Withdrawals for qualified medical expenses are tax-free. This is why an HSA is superior to a traditional 401(k) or IRA’s as a retirement vehicle. If you spend on qualified medical expenses, you NEVER pay taxes on these dollars. Plus, you never have to take required minimum distributions.
If you have questions or would like more information, give us a call.