A Health Savings Account Helps You Prepare for Retirement

Oct 26, 2015 | Miscellaneous

With the cost of health care rapidly rising, all American workers must pay special attention to their retirement plans. As a federal employee, you have several options with regard to retiree health care benefits, but you will still incur some out-of-pocket expenses. If you choose a low-premium, high-deductible plan, you will be responsible for the entire deductible each year before your insurance benefits kick in. On the other hand, you can choose a plan with a low or no deductible, but you will still make co-payments toward your car. In both scenarios you might have to pay something toward your prescription medications.

The expenses are incurred throughout your career, but also after retirement. While you might be saving for retirement and counting upon your federal employee retiree benefits to cover your cost of living, unusually high health care expenses could potentially eat a hole in your future retirement budget.

Some federal employees are eligible to contribute to a Health Savings Account, which allows you to set aside pre-tax dollars for qualified health care expenses. A HSA can help you lower your tax liability while covering out-of-pocket health care expenses, but it can also help you to save for retirement. Your unused balance can be rolled over from one year to the next, and you can still access your HSA once you retire. In other words, you can start saving for future health care expenses right now.

As long as you use the funds in your HSA to cover qualified health care expenses, withdrawals from the account will not be taxed. Therefore, even those of you who don’t incur large health care bills now can still set aside money for expenses in retirement. Establishing a HSA now can be one of the best ways to offset high health care bills later, and shelter more of your retirement budget from rising prices.

For more information on establishing a health savings account, or for help planning your retirement in general, please call our office to schedule a consultation.

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