FIRE & HSA: Can an HSA Help You Retire Early?

by | Sep 30, 2022

Retiring early seems like a dream come true. Why wait until your golden years to enjoy a life of leisure and travel? More and more people are thinking differently about retirement and going against the typical model of contributing to your retirement accounts to retire by 65. A growing movement called FIRE (Financial Independence, Retire Early) is helping people achieve their goal of early retirement by using different methods of living frugally and saving for retirement. A Health Savings Account (HSA) is known to help you save for your retirement goals, including medical expenses, but can it help you achieve goals for F.I.R.E.?

What is the F.I.R.E. Movement?

The F.I.R.E. movement is a way of life that aims to retire decades before the customary retirement age.  The goal with F.I.R.E. is to save aggressively–somewhere between 50%-70% of your income to retire in your 30s-50s. Typically, FIRE proponents aim to withdraw 3%-4% of their annual income in retirement.  FIRE can look different for individuals because everyone has different goals and lifestyles. However, one thing is for sure; FIRE requires diligence and planning. It’s essential to actively manage your finances, invest wisely, and utilize various tax-advantaged accounts. 

Some Common FIRE strategies: 

Lean FIRE: A strategy that involves living and maintaining a modest lifestyle now and during retirement. 

Barista FIRE: This FIRE strategy allows you to save enough to cover your living expenses, but you will require a low-stress, part-time job to pay for health expenses. 

Fat FIRE: A strategy that involves maintaining a higher standard of living and gives you greater financial flexibility. 

How An HSA Can Help Reach F.I.R.E. Faster 

An HSA account is the perfect early retirement tool for F.I.R.E.  Since every dollar counts, there are several ways an HSA can help you save money for early retirement:

  1. Take Advantage of Tax Savings on Qualified Medical Expenses

 You might have qualified medical expenses like doctor visits or prescriptions every year. Since every dollar counts, get some extra savings with your medical expenses. Also, save on necessities such as bandaids, feminine hygiene products, and sunscreen. Those tax savings on yearly medical costs will add up when you live the F.I.R.E. lifestyle.  

2. Use That Triple Tax Advantage

You’ll need to utilize tax-advantaged accounts for early retirement.  An HSA is one of the most tax-advantaged accounts you can own. Your contributions are either pre-tax (if made through your employer) or tax-deductible (if self-initiated). Your money grows tax-free, and any money you take out for qualified medical expenses won’t be taxed. 

3. Invest for Early Retirement

It’s no secret that we’re big fans of investing your HSA money at SavingsOak. With an HSA, you can grow your balance through investing and have an incredible nest egg for medical expenses in retirement that you can withdraw from tax-free. 

FIRE requires a lot of financial discipline and may not be for everyone. However, an HSA can be invaluable in your early retirement toolbox and help you reach your FIRE goals faster!

Subscribe to SavingsOak Academy:

Don’t miss out on a single post! Have useful HSA information delivered straight to your inbox.

    Recent Posts

    Tribute to Alaric Aloor

    Tribute to Alaric Aloor

    We are heartbroken to share the passing of our beloved friend and advisor, Alaric Aloor, over the weekend.

    HSAs Help Women Make Progress Towards Financial Security

    HSAs Help Women Make Progress Towards Financial Security

    Women face more challenges when it comes to savings and retirement. It is primarily because women encounter a wage gap that follows them into their retirement years. Women only have 70% of the overall income in retirement that men enjoy. Many in that age group have no retirement savings at all.  In light of these facts, women need to plan for their retirement and consider health savings accounts (HSA) as a tool to help them achieve their goals and set themselves up to be financially secure.

    Are You Planning for an Early Retirement?

    Are You Planning for an Early Retirement?

    Retirement income, savings, and investments all come to mind when people plan for retirement, but one thing often overlooked is the role that healthcare expenses can play in your retirement plans. It is time to focus in on that as well.