A Health Savings Account can save you a lot of money now – and give you a healthier retirement income later. HSAs were designed to help folks struggling with out-of-pocket medical expenses. But a key provision makes them terrific “back up” retirement accounts, too. Rob West talks about that with Mark Biller. This is Faith and Finance – biblical wisdom for your financial decisions.

Mark Biller is the Executive Editor at Sound Mind Investing ( .

• We mention the benefits of Health Savings Accounts from time to time on the program, but today we’ll dive specifically into the connection they can have to retirement investing, which a lot of folks may not be aware of, right?
• When you think about saving for retirement, you probably think about your workplace retirement plan or an IRA. But a Health Savings Account can also be a powerful retirement savings tool for some people. In fact, in certain situations an HSA can basically be thought of as a “super IRA.”
• Let’s start with a little background on HSAs.
• To be eligible to fund an HSA, you have to have a high-deductible health plan, whether that plan is provided by your employer or purchased directly by you. This year, that means an individual plan with at least a $1,500 deductible, or a $3,000 deductible for a family plan.
• If you have a high deductible plan like that, you’re basically self-insuring for routine and relatively minor medical expenses. So the government lets you contribute to a Health Savings Account so you have money on hand to pay those relatively minor health expenses, while insurance covers you against anything major.
• That HSA money can be used to cover your deductible, co-pays, and a wide variety of health care products and services. HSAs have limits as to how much you can put in them each year — in 2023, the maximum contribution for an individual is $3,850, and the family max is $7,750. Like IRAs, “catch-up contributions” are also allowed for people age 55 or older.
• A lot of that actually does sound similar to an IRA.
• Yes, and there are similar tax benefits available as well. Except in the case of HSAs, the tax treatment is potentially even better than IRAs, because they’re triple tax-advantaged: No taxes going in, no taxes on account growth, and no taxes if the money is withdrawn to pay “qualified health expenses.”
• That’s why HSAs are sometimes referred to as “super IRAs” – because regular IRAs and other workplace retirement plans are only double tax-advantaged, meaning you pay taxes at one end with IRAs – either when the money goes in or when it comes out, depending on whether you’re using a Traditional IRA or a Roth. But HSAs give the tax benefit on both sides, making them unique.
• And it’s that triple tax advantage that makes HSA a potentially powerful tool for retirement investing, right?
• Absolutely. The big key is whether a person can cover their out-of-pocket medical costs with funds outside their HSA account. If a person can do that, then the money that accumulates in their HSA gets that triple benefit as they invest it over the years.
• Two important notes:
• 1 – if you’re not sure if you can pay all your health expenses using non-HSA money, there’s no downside for trying. For example, say you decide to save the maximum in your HSA and you’re going to try to cover your minor health costs with non-HSA money. But if you end up having to dip into your HSA for half those costs, you’ve still got half that money sitting in likely the very best type of account for long-term investing.
• 2- not all HSA custodians offer access to investments, but many do. At Fidelity, for example, money in Health Savings Accounts can be invested in any of the vast array of investments the company offers — mutual funds, exchange-traded funds, individual stocks, and more. Another popular HSA provider, Lively, offers access to Schwab’s investing platform. So having good investment options is fairly common.
• But one of the stipulations of that “triple advantage” is that HSA money has to ultimately be used to pay for qualified medical expenses, correct?
• That’s correct. But there’s an important loophole that’s important for people who are using HSAs as long-term retirement savings accounts. Say you fund an HSA for a number of years and then retire. In retirement, you can take money out of the HSA for any new qualified health expenses you incur. But you can also reimburse yourself for qualified health care expenses that you incurred in the past.
• That means that as long as you save your receipts for health care expenses that you pay out of pocket now, you’ll have the ability to take those amounts out of your HSA in retirement whether you have new health care expenses or not.
• Here’s an example. Suppose that at age 66, you withdraw $15,000 from your HSA to buy a car (or any other non-health-rel……(read more)

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Saving for retirement is a crucial aspect of financial planning, yet many people overlook one powerful retirement savings tool: the Health Savings Account (HSA). Mark Biller, a financial expert, refers to the HSA as the “other retirement account” and believes it offers unique benefits that make it a valuable addition to any retirement savings strategy.

An HSA is a tax-advantaged account that individuals with a high-deductible health insurance plan can use to save for qualified medical expenses. Contributions to an HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses. Additionally, unlike Flexible Spending Accounts (FSAs), funds in an HSA roll over from year to year, allowing for long-term savings growth.

According to Mark Biller, the unique tax advantages of HSAs make them a valuable retirement savings tool. “Contributions to an HSA are tax-deductible, which can reduce your taxable income in the year of contribution,” says Biller. “The funds in your HSA grow tax-free, similar to a Traditional IRA or 401(k), and withdrawals for qualified medical expenses are tax-free as well.”

In addition to the tax advantages, HSAs offer flexibility that traditional retirement accounts do not. “While the primary purpose of an HSA is to save for medical expenses, once you turn 65, you can use the funds for any purpose without penalty,” explains Biller. This makes an HSA a versatile tool that can be used to cover medical expenses in retirement or supplement other retirement income.

To maximize the benefits of an HSA, Biller recommends contributing the maximum allowed amount each year and investing the funds for long-term growth. “By contributing the maximum amounts to your HSA each year and investing those funds in a diversified portfolio, you can take advantage of the potential for significant growth over time,” says Biller. “This can help supplement your other retirement savings and provide a cushion for future medical expenses.”

In conclusion, Mark Biller believes that an HSA is a valuable retirement savings tool that should not be overlooked. With its unique tax advantages, flexibility, and potential for long-term growth, an HSA can play a valuable role in a well-rounded retirement savings strategy. By contributing regularly, investing wisely, and using the funds strategically in retirement, an HSA can help individuals achieve financial security and peace of mind in their later years.