How much is needed for healthcare costs in retirement?

It’s a question that looms large for anyone planning their financial future. According to the Fidelity Retiree Health Care Cost Estimate, a staggering figure emerges: a single person aged 65 in 2023 may need to save approximately $157,500 (after tax) to cover health care expenses in retirement. For an average retired couple aged 65 in 2023, this number doubles to about $315,000. These aren’t just numbers; they’re wake-up calls to anyone thinking about their financial well-being in later years.

With such significant costs on the horizon, it’s crucial to consider every available tool to prepare financially for retirement. One tool often misunderstood and underutilized is the Health Savings Account (HSA).

Is an HSA just a savings account for health expenses?

This question echoes frequently among professionals and business owners I meet through Tannery Company. However, the truth extends far beyond this simplistic view.

An HSA, or Health Savings Account, isn’t merely a place to stash cash for medical bills. It’s a powerful financial tool that can amplify your wealth-building and tax-saving strategy. But are you leveraging it to its fullest potential?

Turning Health Expenses into Financial Gains

Imagine turning your necessary health expenses into opportunities for financial growth. Sounds intriguing. Let’s dig deeper. An HSA allows you to contribute pre-tax income, which grows tax-free and can be withdrawn tax-free for qualified medical expenses. It’s a triple tax advantage that few other accounts offer. But here’s the kicker – what if you could use this not just for your current medical bills but as a stealth retirement account?

A Secret Retirement Vehicle?

Yes, you heard that right. Beyond its immediate benefits, an HSA can be a secret weapon in your retirement planning arsenal—funds in your HSA roll over year after year, accumulating interest. Once you reach age 65, you can withdraw funds for any purpose without penalty, paying only the income tax on withdrawals not used for qualified medical expenses.

Maximizing Your HSA Contributions

Are you contributing the maximum allowable amount to your HSA? For 2024, individuals can contribute up to $3,850, and families can contribute up to $7,750. If you’re 55 or older,

Unlocking the Power of Your HSA: More Than Just a Savings Account

you can add an extra $1,000 to those totals. Maximizing these contributions can significantly reduce your taxable income.

Investing Your HSA Funds

Leaving your HSA funds in a low-interest account is like storing a racecar in a garage and never driving it. Investing your HSA funds can increase your account’s growth rate, turning your health savings account into a potent investment tool.

Are You Making the Most of Your HSA?

Think about it – when did you last review your HSA strategy? Are you using it for current medical expenses or maximizing its potential as a tax-advantaged investment tool? At Tannery Company, we don’t just look at the numbers; we look at opportunities. Opportunities to save money, grow wealth, and ensure you’re making the most of every available financial tool.

HSAs offer more than just a way to pay for medical expenses; they provide a path to greater financial freedom and security. Are you ready to explore how your HSA can be more than a savings account?

Let’s have that conversation and turn your necessary expenses into strategic investments.

Because, like you, we are not average.

Schedule a call with Tannery Company

Michael Tannery CPA CDFA® AIF® ● CEO

Creative Thinker | Tannery & Company

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