The triple tax advantage of an HSA
Deductible going in, untaxed while invested, untaxed coming out for medical costs. Nothing else in the tax code does all three.
By Meg Quillen, Cedar Landing Benefits
A health savings account is the only account that is untaxed at all three stages. Contributions reduce taxable income, growth is untaxed, and withdrawals for qualified medical expenses are untaxed as well.
Used well, it is a retirement account that happens to have a medical label.
The rules that matter
You must be covered by a qualifying high-deductible plan, and you must not be enrolled in Medicare or claimed as someone else's dependant. Limits are set annually, with a catch-up contribution available from fifty-five.
Unlike a flexible spending account, nothing is forfeited at year end. The balance rolls forward indefinitely and remains yours if you change employer or plan.
The habit that makes it powerful
Pay small medical costs from cash where you can, keep the receipts, and let the account invest. There is no deadline for reimbursing yourself, so a receipt from today can fund a withdrawal decades from now.
Two Medicare notes. Enrolling ends contributions, and Part A can backdate six months — so stop contributing six months before you enrol. But you may spend the balance on Medicare premiums and out-of-pocket costs for as long as it lasts, which is exactly the right use for it.
An estimate for planning, not a quote. Medicare and the Marketplace set your real figures.
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