Making a cushion to ease the shock of healthcare costs, which incline to rise as a person becomes older, is a part of saving for retirement. But there are other ways to save money for the future besides 401(k)s and IRAs. A smart option to prepare for this significant retirement expenditure is through health savings accounts, which also provide additional tax advantages.
According to Andy Leung, a private wealth advisor at Procyon Partners in Connecticut, “it’s a really smart place to deposit retirement money as you prioritize savings accounts.”
“Depending on your work circumstances, contributions to health savings accounts can be made either before taxes or as a tax deduction. The accounts’ earnings and withdrawals for legitimate medical costs are tax-free as well. It’s a quadruple tax saving,” adds Leung.
Money in an HSA has no expiry date, unlike funds in Flexible Savings Accounts, which must be depleted by year’s end. So you can say goodbye to your yearly trip to the FSA drugstore at the end of the year to load up on bandages, antacids, and menstruation items, and hello to the power of compounding.
You don’t have to fill up your HSA to the maximum if you are qualified to donate to one. Amy Richardson, a certified financial adviser with Schwab Intelligent Portfolios Premium, advises saving money gradually as your income rises.
That additional cash may be very useful in retirement. According to Fidelity, the average retiree’s annual expenses for healthcare total about 15%.
Source:real simple
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