More Americans are participating in high deductible health insurance plans, making them eligible to also participate in a Health Savings Account (HSA). HSAs can be a super retirement savings vehicle. Here is why:  contributions are made tax free, they grow tax free, and withdrawals are tax free as long as they are made for  “qualified medical expenses.”   (See in IRS Publication 502 for a complete list.)  Unlike flexible spending accounts, HSAs can roll over from one year to the next, are portable from one job to the next and are available to be used in retirement.  Similar to 401(K) plans, HSA plans typically come with a number of investment options.  Because of the significant medical expenses most people will incur in their retirement (one study sponsored by Fidelity estimated a couple’s medical expenses in retirement after Medicare coverage to be $245K), and the HSA’s superior tax advantages, it is wise to max out the savings potential of this savings vehicle first before maxing out contributions to other tax preference savings accounts (e.g., Roth IRAs, IRAs 401Ks).


The individual and family contribution limits are (employee and employer combined):

CY17             CY18

Individual Coverage           $3,400       $3,450

Family Coverage                  $6,750       $6,900

For individuals over 55, there is an additional $1,000 catch up limit.


by Barry Jamieson, CFP®, MA

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