Health Savings Accounts are a great way to plan for medical expenses, but did you know they can also help you prepare for retirement? Here are a few tips on how to get the most from your HSA account now and in the future:
Contribute the Maximum
One of the greatest benefits to HSA accounts are the tax advantages. Not only are contributions made to the account tax-free, but they tend to earn a higher rate of interest than other types of savings accounts. In addition, earnings on these accounts are also tax-free when the funds are withdrawn for qualified medical expenses. Due to the tax benefits, contributing the maximum annual amount can help you more quickly build your nest egg for current unexpected medical bills, while building a reserve for future use when medical expenses may be higher.
Pay out of Pocket
While this may not be an option for everyone, if you can pay current medical expenses out of pocket instead of tapping into your HSA, then you should. While medical expenses tend to be lower when we are younger in age, it may be helpful to leave your HSA funds for later when you may need it more. Many people pay their bills and other general expenses from checking accounts where their funds are not earning a lot of interest. Leaving funds in your HSA while earning a higher rate of interest, will help your funds grow more quickly for use in the future.
Make Use of Extra Cash
For those who have some extra cash, put it to work funding your 401k or other retirement plan account. Then, allocate any leftover in your HSA account. This will set you up nicely to ensure you have plenty of money for your general expenses, as well as a sufficient pool of funds to handle any medical expenses that arise.
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