What is the connection between health and financial wellness? It seems there is a strong one. Money ranks as the number one source of stress for people. Moreover, there is a link between financial wellness and health. According to EBN, seventy two percent of people worried about affording healthcare in retirement. Sixty five percent of people worried about outliving their retirement savings. But what if you are a person who contributes every month to your 401(k) and IRA accounts? If you aren’t considering a health savings account (HSA), you could be missing an extremely beneficial retirement tool for your medical costs.
How Can HSAs Help You with Your Retirement Goal
HSAs allow you to start planning for medical costs – today and in retirement. Since they are one of the most tax-advantaged accounts around, as soon as you sign up and start contributing, you are eligible to save tax money on your qualified medical expenses.
However, while a lot of people use their HSA as a way to pay current medical expenses, one way to see how powerful an HSA can be is to put aside money in your account for your retirement medical expenses. One way you can do this is by paying for some of your current medical expenses out-of-pocket and leaving the money to grow in your account. Since any money left in your HSA will roll over, you don’t have to worry about spending it all by the end of the year as you would with a Flexible Spending Account (FSA). Another option is to hang on to your current receipts, then reimburse yourself years later when you’ve accumulated a larger sum in your account.
HSAs Help You Think Strategically About Your Medical Savings
When you sign up for a High Deductible Health Plan (HDHP)/HSA, part of the exercise is to understand how much you are spending on your medical costs in a year. That awareness helps you get a sense of what you need to put aside every year just for medical. It’s that sort of mindset that helps you plan for your retirement medical costs. According to PlanSponsor, HSA owners are more aware of retirement health care costs. They are also better prepared and confident that they will have the money they need to retire when the time comes.
Supercharge Your HSA by Investing
Investing a portion of your HSA money is a feature that is often overlooked by account holders. However, the rewards when you do can be high. According to the Employee Benefit Research Institute (EBRI), only 4% of HSA account holders invest, who have higher balances than non-investors. If you are a person who is just starting out on your retirement savings journey or looking to expand your retirement savings portfolio – an HSA could be just what the doctor ordered!