51% of Americans Are Missing This Wealth-Building Opportunity – Arizona Daily Star
When it comes to saving for retirement, many people are familiar with the concept of contributing to an IRA or 401(k) and investing that money. And doing so is a good way to build long-term wealth.
But IRAs and 401(k)s aren’t your only option for socking money away for your senior years. You can also save for retirement in a health savings account, or HSA.
Yet many people aren’t aware of the wealth-building options HSAs offer. As such, a lot of folks are truly missing out on a chance to accumulate extra funds for retirement.
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Are you making the most of your HSA?
An HSA is a hybrid saving and investment account that lets you sock money away for near-term and future healthcare costs. Many people routinely confuse HSAs and FSAs (flexible spending accounts), but they’re completely different.
FSAs let you set aside money for near-term healthcare costs, and you’re generally required to spend down your FSA balance year after year or risk forfeiting funds. HSAs, on the other hand, don’t come with an expiration date. You can fund an HSA today and withdraw that money in 40 years, if that’s when you need it.
Furthermore, HSAs allow you to invest funds you aren’t using immediately to grow your money into a larger sum over time (something FSAs don’t allow for). In fact, the best way to put your HSA to good use is to not take withdrawals year after year, but rather, let that money sit and grow. That’s because investment gains in an HSA are tax-free, as are withdrawals, provided they’re used for qualified healthcare expenses.
But many HSA savers aren’t aware of that fact. Fidelity reports that 51% of Americans don’t know they can invest their HSAs for added growth. And among people who don’t have an HSA, 44% don’t realize that HSA funds can be carried forward year after year. It’s this misinformation that could be costing many people a lot of money in the form of missed opportunities.
Put your HSA to good use
To qualify for an HSA, you must be enrolled in a high-deductible health insurance plan. The definition of what that is can change from one year to the next. But if you meet that requirement, it pays to max out your HSA contributions year after year and reserve that money for retirement.
Not only are HSA gains and withdrawals tax-free, but you get a tax break on your contributions in the same …….