HSAs: Part of your financial plan

Use your HSA as a tool for retirement savings

If you’re like most people, you may think about your health savings account (HSA) solely as a way to pay for current-year qualified medical expenses, such as trips to the doctor or prescriptions. But did you know that you can also use it as a savings tool?

Comparing financial accounts

Unlike other accounts, an HSA is one of the only savings vehicles that allows you to put money in on a before-tax basis through payroll contribution, grow your savings tax-free (interest and investment earnings are not taxed), and take the money out income tax-free for qualified medical expenses. 

With a 401k, you’ll always pay taxes when you withdraw funds, but if you use HSA funds for qualified medical expenses — it’s generally 100% income tax-free. Plus, after turning 65, you can use your HSA funds for non-qualified expenses. You’ll pay ordinary income tax on those funds, but the 20% tax penalty no longer applies.

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