Contribute more to take advantage of long-term, tax-free growth potential .A majority of people are looking to put more money into savings, and a health savings account (HSA) may be just the way to do it.HSAs offer a “triple tax advantage”: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses.That makes it a great way to pay for your current healthcare costs. But you could get more out of your HSA when you also use it to save for the future.
The following example shows how one family uses an HSA to cover out-of-pocket medical costs and save for healthcare costs in retirement.
- Lee’s family is on a high-deductible health plan. They typically spend $2,000 a year on out-of-pocket medical expenses, including doctors’ visits and Lee’s husband’s regular bloodwork and CT scans. If Lee put $77 out of her biweekly paycheck into her HSA, she would cover the year’s medical bills.
- But Lee has more ambitious plans. She knows that an HSA exposes her money to potential growth with no use-it-or-lose-it deadlines. So she contributes $200 to her HSA from every paycheck.
- By the end of one year, Lee has contributed $5,200 to her HSA. Of that amount, $2,000 has gone toward immediate medical expenses. That means she can invest the remaining $3,200.
- For the sake of argument, let’s say Lee keeps this pattern up for 10 years. Her contributions and expenses remain the same, and she earns a 6% annual return on the money she’s invested.
- Lee’s HSA retirement savings could help her offset healthcare costs in retirement.
FOR ILLUSTRATIVE PURPOSES ONLY. This hypothetical illustration does not reflect a particular investment and is not a guarantee of future results. It assumes $200 biweekly contribution, a 6% annual rate of return, reinvestment of earnings and no withdrawals on the invested portion. Rates of return may vary. The illustration does not reflect fees, which could change the outcomes provided.
Consider following in Lee’s footsteps and investing a portion of the money in your HSA each year. Over time, the money you set aside can make a real difference in paying for healthcare costs in retirement. To learn more register for the Empower Education Series below.
Empower Education Series topic: Planning for Healthcare Costs
Alliance Health and Retirement plan members as you’re planning for your financial future, it’s important to understand the effect that healthcare costs may have and how you can prepare for what lies ahead. Attend this educational session, presented by Empower, to learn some important facts about what may be your largest retirement expense.
Key topics will include:
• Understanding and planning for healthcare costs in retirement
• What you need to know about Medicare
• How to get a head start with a health savings account (HSA)
Attend a live virtual session:
• Tuesday, August 2 at 11 a.m., 2 p.m. and 5 p.m. ET
• Thursday, August 11 at 2:30 p.m. (en Español), 5:30 p.m. and 8:30 p.m. ET
• Wednesday, August 17 at 9 a.m., 12 p.m. and 3 p.m. ET
• Tuesday, August 23 at 12 p.m., 2 p.m. and 4 p.m. ET
Register for “Planning for Healthcare Costs” today!
Sign up at educationseries.empowermytime.com for the session that best fits your schedule.
Empower Retirement is a premier retirement services provider that’s transforming the way people approach retirement planning. Serving Alliance 403(b) Retirement Plan participants, Empower makes retirement planning personalized, accessible, and easier to understand. In whole, they help over 9.6 million people with a vision grounded in a simple, singular mission: to help people save enough today and work toward a secure future.
