This post is about how Healthcare Savings Accounts (a.k.a. HSAs) save you tons of money in way of tax savings!
So, let’s come to the point – how do HSAs save you tax dollars?
If planned well, the money you saved in an HSA is never taxed; Yes, you heard it right – not taxed at all – Not when you contributed, not when you invest and grow the funds, not when you take a distribution and use the money for medical expenses.
Let’s look at this with an example.
Let’s say you are 45. You save $5,000 in your HSA this year. And due to your savvy investing decisions, the money grew into a nest egg of $25,000 by the time you retire at 65. Now, you can take the money out for your post-retirement healthcare expenses, and not pay a dime in taxes.
Isn’t it great to save money for your retirement healthcare expenses and save on taxes in the process?
Think about this for a moment – and compare this with the retirement vehicles you know – such as Traditional IRAs, 401Ks, 403s, or ROTH IRAs.
Traditional IRAs, 401Ks, 403s – contributions are not taxed, growth is not taxed, however when you take the money out, uncle Sam takes his cut
ROTH IRAs – While Growth and distributions are not taxed, your contributions were taxed.
Finally, yes, there are eligibility rules – and that is for another time. The point is – if you are eligible, here is a tax planning opportunity that you want to be aware of.
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