By J.P. Dahdah, Founder & CEO of Vantage
Most Americans consider a 401(k) or an IRA the best vehicle available for retirement planning. A Health Savings Account (HSA) may be another flexible option. Established by the U.S. government in 2003, a HSA offers even more tax advantages than a 401(k) or an IRA when used to cover medical expenses.
Similar to a retirement plan, a Self-Directed HSA allows you to put money aside pre-tax.
An additional 7.65% in FICA tax savings could also be achieved if you set up your contributions via automatic payroll deductions.
Once contributions have been deposited into your HSA, the money grows tax free and distributions, if used for medical expenses, can also be taken out tax-free (like a Roth IRA). Best of all, the money inside a HSA not being used for medical expenses can be self-directed into alternative investment opportunities through a Vantage Self-Directed Health Savings Account.
What’s the catch? To be eligible to open a HSA, you must be participating in a HSA qualified, high deductible health plan. For 2016, these medical plans have deductibles of at least $1,300 for individuals and $2,600 for a family. Just like retirement accounts, a HSA has an annual contribution limit. Individuals can contribute up to $3,350 and a family can put in as much as $6,750 per year. If you are over the age of 55, you can place an additional $1,000 into a HSA each year. Keep in mind these contributions are on top of what you are able to contribute to your more traditional retirement accounts, which translates into additional tax savings for you and your family!
Even though it is exciting to dream of all you will be experiencing during retirement, the reality is the majority of your retirement funds will be used to cover health care expenses, not trips to Europe. So, if you want to implement the wealth building strategies of savvy investors, consider opening a HSA to help fund your future medical, dental, vision, Medicare and long-term-care premiums; all of which are considered “qualified expenses” under the HSA rules. Call one of our knowledgeable staff members to learn more about adding a Self-Directed HSA to your current strategy.