Health savings accounts (HSAs) are grossly underutilized as a retirement investment tool by the people who have them, even though thousands of dollars can be invested each year.
✅ How to Get the Most out of Your HSA Account
HSAs are tax-advantaged accounts intended for medical expenses that high-deductible health plans don’t cover. They are typically offered by employers, but can also be obtained from banks, credit unions and specialty providers.
To qualify for an HSA, you must be enrolled in a high-deductible health plan of at least $1,600 for individuals and $3,200 for family plans in 2024. In 2025, the thresholds will be $1,650 and $3,300, according to the IRS.
🔎 Most importantly, these funds can be invested in a range of options that may include exchange-traded funds, bonds and stocks.
✅ Three Major Tax Advantages of HSA Accounts
• Tax-deductible contributions: Funds contributed to your HSA are deductible from your taxable income, potentially reducing your taxes by up to 37%, depending on your tax bracket.
• Tax-free withdrawals for healthcare expenses: Withdrawals to pay for qualified medical expenses, such as lab and nursing services, are not taxable.
• Tax-deferred earnings: HSA investment earnings are not taxed as they accrue, and withdrawals used for qualified medical expenses remain tax-free. However, withdrawals for nonqualified expenses before age 65 are subject to income tax and a 20% penalty.
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📝 It should be noted that HSA earnings could go a long way toward covering medical expenses in retirement, which are estimated at $315,000, starting at age 65, according to a 2022 projection by Fidelity Investments.
In addition, if they don’t need the earnings for medical care later in life, they would only be taxed on withdrawals for non-qualified expenses after age 65.
At Wave Tax, we always strategically advise our clients and offer them the options that best suit their present and future.
📍 If you want to contact us, you can write us at info@wavetax.us