How to Save More Tax-Free Money for Retirement

Combining Traditional Retirement Vehicles with an HSA to Save More

Savings for retirement might not be the first thought that pops in your head each morning. It will however dramatically impact your lifestyle in years to come. Finding more ways to save tax-free retirement money will help you accelerate this process. By doing so, you can keep more of your hard-earned money and invest in your financial well-being. Your future self will thank you.

Traditional Retirement Options

Personal retirement vehicles like a 401(k) and IRA create a clear path to save money for retirement. These tax-advantaged accounts are the gold standard of retirement savings. This is also where most individuals and families stop, at least as it relates to dedicated retirement savings. What if you want to save even more? Perhaps you have planned to shift to a retirement home later in life, to be able to live independently and free, which is something you’d need money for. At least if you want to have a happy transition to a retirement home instead of a stressful one. Hence, creating more dedicated tax-free savings should not be limited by your annual 401(k) and IRA contributions limits. We have a new retirement account to show you – the HSA.

The Stealth Retirement Option: HSA

HSAs (Health Savings Accounts) are by definition personal savings accounts for health expenses. But their tax structure mimics that of a 401(k) and IRA. In 2019, individuals can contribute up to $3,500 tax-free and families can contribute $7,000. These contribution limits have no caps based on income.

HSAs allow for tax-free contributions, growth and deductions (if used for qualified medical expenses). However, after the age of 65, your HSA funds can be used for anything, just like a 401(k) and IRA.

HSAs were created for health savings, but who is to say you can’t use them for that and retirement savings. Not the IRS! This means you can use them as an additional retirement account. Maybe HSAs are the new stealth IRA?

The Combined Savings (and Retirement Opportunity)

When you combine these opportunities, you create the most tax-free retirement savings available. This is more money for you and less that gets shipped off to the IRS. This means you can enjoy your retirement life the way you want, be it by shifting to an assisted living facility in florida or travelling on a cruise to see the Wonders of the World.

Anyway, coming back to the topic, if you want to optimize your retirement saving, then use a 401(k), IRA and HSA. What you might not know is that an HSA has even more tax advantages than a 401(k). A 401(k) requires that you wait until 59 and 1/2 years of age to use your funds (without paying an IRS penalty).

You can use your HSA funds today for qualified out-of-pocket medical expenses, 100% tax-free. This creates more flexibility for all of those just in case scenarios. It also creates savings for the expected $275,000 in expected health costs (per couple) in retirement (on top of Medicare). An HSA ensures you can use your other retirement funds for the better things in life. You worked for it!

On top of that, HSAs have no mandatory distributions. You get to decide when and if to sell any HSA investments or let them grow into your 70s, 80s, and 90s.

New retirement savings options don’t come around that often. Combining the tax advantages of a 401(k), IRA, and HSA ensure that you keep more of your money, can invest tax-free for your retirement, and have all the funds you need in the years to come. Want to get started? You can check to see if you have an HSA-eligible health plan and open an HSA here.