A health savings account (HSA) may be the best tax-beneficial tool you can use. Health Savings Accounts are triple-tax free, so if eligible to contribute, make the most of it!
Tax advantages include:
- Tax-free or tax-deductible contributions
- Tax-deferred earnings in the account, and
- Tax-free withdrawals for qualified health care expenses.
In 2024, if you have an HSA eligible health insurance plan (<-click to see plan eligibility on pg.2), you can contribute up to:
- $4,150 as an individual
- $8,300 per family
- Add $1,000 if you are age 50 or older in 2024.
If HSA dollars are invested, the earnings inside the account may be significant (see chart). The best chance to benefit from long-term tax-deferred compounding is the result of paying for current health care expenses from funds outside of the HSA to the extent feasible. This approach can maximize all three tax-advantaged aspects of an HSA to help cover qualified health care expenses in retirement.
Of note: While HSAs are tax-advantaged accounts, there are tax penalties for withdrawals that are not qualified before the age of 65; therefore, it is important to have a separate emergency savings account. See IRS publications 502 and 969 for details on qualified withdrawals.
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