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  • Brett Bujdos

You save for retirement, but do you save for healthcare?

The creation of retirement savings vehicles such as a 401(k), IRA, and Roth IRA have become widely known over the past couple of decades and are helping millions of Americans save for a longer retirement. Yet, there is one way to save for retirement that most people aren’t aware of which can help preserve retirement assets in later years and offer triple-tax benefits. Welcome the Health Savings Account, or HSA.


David Mullins, founder and owner of David Mullens Wealth Management Group in Richlands, VA estimates “about seven in 10 clients aren’t familiar with the benefits an HSA offers” (Munk). What are these benefits? As previously mentioned, they offer triple-tax benefits. They are funded with pre-tax dollars (reducing your taxable income), grow tax-free, and can be withdrawn tax-free for qualified expenses including prescriptions, copays, and other medications (Munk). The main goal of an HSA account is to “bucket” a portion of income for qualified expenses while allowing this savings to benefit from the powers of systematic savings and compounding. The earlier individuals save to an HSA account, the earlier time and compounding can begin growing this investment to help cover future and often expected medical expenses that can be a significant burden to most people.

Similar to traditional investment vehicles, funding an HSA account can be incredibly beneficial for people of all health levels and lifestyles. While probably not giving this too much thought, even young individuals planning to have a family and kids could save thousands of dollars in future out-of-pocket, unbudgeted expenses later in life by funding an HSA account in their younger years. Additionally, HSA’s could prove to be valuable savings bucket for retirement when medical expenses generally rise due to deteriorating health. An advisory company named Willis Towers Watson projected that “a man of average health who retired in 2020 at age 65 and reaches the typical life expectancy of 85 will spend about $140,000 in out-of-pocket medical costs” and “the typical expenditure for a woman who retires at 65 and lives to age 87 is $159,000, according to the advisory company’s estimates (Munk). Health expenses arise for countless reasons, unexpectedly for many, and can be very costly if adequate savings aren’t in place. The costs of healthcare are one of the fastest growing expenses people incur during their lifetime, so why not begin saving now?

Reference:

Munk, Cheryl. “HSAs Are Unappreciated and Underutilized. Advisors Can Change That.” Barron's, Barrons, 23 Nov. 2021, https://www.barrons.com/advisor/articles/hsas-underutilized-financial-advisors-51637684905?mod=hp_ADVISOR.

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