The Unbeatable Retirement Savings Tool

(and why you might not be using it right)


It’s not often we get to rejoice in a new retirement savings tool. More likely, many fear things will be taken away, our options to save limited more and more. However, the HSA, if used properly, can be just that—a tool with a new appreciation and tax advantages second to none. With the increasing use of high deductible health insurance plans, many are getting access to these health savings accounts for the first time. But they are much more than a tax-deductible way to fund your health needs this year. In fact, they can be more impactful to your retirement than any other tool out there. That is because, if invested, you will enjoy tax free growth for as long as the funds remain in the account. This is in addition to the deduction you get on the contribution. And there are no forced distributions like the age 72 marker for IRAs and 401ks. However, to enjoy these benefits you must resist the temptation to use them now, and instead, use cash to fund health care needs now while the invested balance grows tax free. You can save receipts, choosing to reimburse yourself at any point down the road should you need to, tax free.

In addition, in the unlikely event you don’t need to use the account for health care needs, you can take the funds out after 65 with no penalty, though you will owe income tax like an IRA. However, even in this event, you still enjoyed a tax deduction on your contribution and tax deferrals over the years, as if you had another retirement account to use--one that doesn’t have income restrictions as IRAs do. So, you may not currently be able to fund an IRA but could get the same result in an HSA, and if you choose to use it for qualified medical needs, you essentially had a Roth with a deduction on the contributions. And again, if you save receipts over the years, you will be able to have access to the equivalent amount of cash tax free & penalty free should you need it, even before the 59.5 age minimum that retirement accounts have.

So, how much can you contribute annually? For 2022, a family can put in $7300 and individuals $3650, with a catch up of $1000 for over 55.

You do have to qualify to have access to an HSA, and that means having a health insurance policy with a deductible of at least $1400 for single coverage and $2800 for families, and not enrolled in Medicare. Also, your employer may provide access to an HSA, and possibly even put money in on your behalf. If they do, these funds do count towards your max limit as well.

If you qualify for this account, it is definitely the best bang for your buck available to you for long term savings. If you have the cash flow and discipline to put off accessing these funds until later in retirement-phase years, you will enjoy the best tax treatment on your investments around.

Let us know if you have any questions on how to properly use these accounts to properly take advantage of their tax savings power.


Jeremy & Eric