Supersize me: Here’s a way to fatten up your retirement savings
Wouldn’t it be something if you could plump up your retirement savings as easily as you can put on a few pounds eating fast food? Here’s one way to do it: Open a health savings account (HSA). It offers a triple tax advantage and you can contribute the maximum every year.
Here’s the catch: Not everyone can do this. HSAs are like side dishes. They are only available to people enrolled in their employers’ high-deductible health insurance plans (HDHP) and who do not participate in any other health insurance plans.
In addition, the HDHP must have minimum deductibles ($1,300 for an individual and $2,600 for a family for 2017) and maximum out-of-pocket costs ($6,550 for an individual and $13,100 for a family for 2017).
If you are enrolled in a plan that meets these requirements, then you may be able to fatten up your retirement savings with an HSA.
invest — having an opportunity to grow your savings tax-deferred over a long period of time — may provide a significant advantage.
Consider these hypothetical scenarios:
• An individual who contributes $3,400 to an HSA for 30 years, earns 4 percent each year, and does not spend any of the money, would have almost $200,000 more for retirement.
• A family that contributes
$6,750 to an HSA for 30 years, earns 4 percent each year, and does not spend any of the money, would have almost $400,000 more for retirement.
Sometimes, employers and health plan providers have relationships with HSA providers. Before defaulting to your employer’s choice, compare the investment options offered and the fees and expenses charged against those of other HSA providers.
Here’s some food for thought for Millennials and Generation Z. Many young people have few medical expenses. Consequently, saving in an HSA may seem unnecessary. If you cast your eyes to the future, or think about the health of your parents and grandparents, it’s not difficult to see health expenses are likely to increase with age.
Even if you stay healthy well into retirement, which we all hope to do, the money in an HSA can be used to help pay Medicare premiums tax-free after age 65.
Saving in an HSA gives participants in HDHPs opportunities to set aside pretax dollars, grow any earnings tax-deferred, and pay no taxes on distributions, as long as they’re used for qualified medical expenses. It’s a win-win-win opportunity.
So, if you’re already saving for the future in an IRA, 401(k), or another qualified retirement plan — and you have the opportunity to enroll in an HDHP and open an HSA — you may want to consider it.
This information is not intended to be a substitute for specific individualized legal advice. We suggest you discuss your specific situation with a qualified legal adviser. Zeiser Wealth Management, LLC provided this article. To learn more about ZWM visit www.zeiserwealth.com. The material was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Triad Advisors. Securities offered through Triad Advisors Member FINRA/SIPC. Advisory services offered through Zeiser Wealth Management, LLC. ZWM is not affiliated with Triad Advisors.