How a Health Savings Account Can Help Prepare You for a Healthy Retirement

With so many retirement planning options, how do you invest your hard-earned money? A Health Savings Account (HSA) can be an ideal option.

Are you currently contributing? Maybe you’re hesitant because you’re already investing your savings into a retirement savings plan like an IRA or 401(k). There’s no need to choose between a retirement savings plan and a HSA. To make the best decision for your unique situation, here is the lowdown on HSAs and how they can help secure your financial future.

What Is a HSA?

It is a tax-advantaged account that allows individuals who participate in high-deductible health plans (HDHPs) to save money for medical expenses. Eligibility to enroll in a Health Savings Account is based solely on the deductible you pay for your health insurance. Before investing, here’s one word of caution: While all HDHPs offered through ADP TotalSource are HSA-eligible, others may carry exclusions, so contact your health insurance carrier or your employer first. For more in-depth information on the ins and outs of HSAs, visit the FAQ.

HSA Versus 401(k): How to Plan for the Future

When you have a choice between a Health Savings Account and a 401(k), there’s no need to choose — it’s great to have both! Keep in mind, though, that you may want to fund your HSA first. Why? If you max out the amount of money you can deposit in a HSA, future “rainy days” won’t have to be such a source of anxiety. A serious car accident or other major medical event will be less likely to send your finances into a tailspin if there are medical savings you can tap into.

In fact, under the right circumstances a HSA could help to protect your retirement funds, such as IRAs and 401(k)s, since you won’t need to dip into them to help pay for health expenses.

This isn’t to say that you should forget about your other options, especially if your employer offers a match for participating in the company-sponsored 401(k) plan. In this case, you may want to contribute the necessary amount to get the full match in addition to funding a HSA. Options like these take a lot of stress out of investing in your future.

Boasting tax-deductible deposits, a safety net for surprise medical expenses and an extra financial lifeline after you retire, a HSA can be the perfect complement to your retirement savings plans.

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