A health savings account is one of the best ways to shore up finances during your golden years. Yet, just a tiny percentage of seniors make use of these accounts.
A mere 8% of people in their 60s and 4% of those in their 70s currently have HSAs, according to a recent survey by TD Ameritrade.
The numbers aren’t much better for folks approaching their senior years. A scanty 16% of people in their 40s and 15% in their 50s have HSAs, according to the survey.
Why is this a big deal? Notably, it’s because HSAs offer advantages that are unique among retirement savings accounts.
Why you need an HSA
Yes, it’s true that HSAs are not strictly “retirement accounts.” In fact, HSAs can be used by savers across the age spectrum, provided they qualify for one. (The main requirement to qualify is that you are covered by a high-deductible health insurance plan.)
But as we point out in “5 Reasons to Use a Health Savings Account as a Retirement Fund,” savvy savers can use HSAs to supercharge their retirement savings.
For starters, HSA offer triple tax advantages:
- You get a tax deduction for each tax year for which you contribute money to an HSA.
- The money grows tax-free.
- You get to withdraw the money tax-free, provided that you use it for qualified health expenses.
As we noted in the story, this makes HSAs unique:
“In essence, if you use HSA money to pay for health care expenses, it’s never taxed. Never. It’s tough to think of any other savings vehicle that offers such a powerful combination of tax incentives.”
Since health care expenses often are a major burden during retirement, HSAs can be a godsend, possibly helping you to save tens of thousands of dollars — or more — on health costs during your golden years.
And even if you luck out and remain healthy during retirement, an HSA can be a boon. One overlooked way to use one is as a sort of alternative IRA. Again, from our story:
“Once you reach the age of 65, you can withdraw your HSA funds for any reason. Just as with a traditional IRA, you will pay income taxes on the withdrawal at that point. However, you will not pay any penalties.”
Is your curiosity piqued? Then read more about HSAs in “3 Great Reasons to Set Up a Health Savings Account.”