Curious if anyone has strong thoughts on the value of contributing to a Health Savings Account (HSA)? Open enrollment just ended at my current firm and I decided not to participate in one this year but thinking about it next year.
I am currently 25 and single, but it seems like a pretty decent way to build up additional savings and use the gains tax free for health care costs when I have kids/retire.
My company was selling the benefits pretty hard -- are they really as good as they are cracked up to be??
You should. It's a very tax efficient investment vehicle. My company was selling the same benefit (cheaper for them) but if you have limited downside risk (able to cover healthcare costs in the immediate term) then there's serious upside potential there.
That's what I was thinking. The thought of using 40 years' worth of gains tax free to cover healthcare expenses when I retire sounds pretty appealing.
Had also heard that they can be fairly expensive when it comes time to use the $, by way of fees, so wasn't sure if people had thoughts/experience actually withdrawing and using $ out of one.
It may be the single most tax-efficient account on the planet if utilized correctly. It's borderline tax evasion:
To sweeten the deal even further, the IRS sets no time parameters around reimbursement of medical expenses. This loophole allows you to pay out-of-pocket for medical expenses today, keep your money invested / compounding, and withdraw whenever you'd like.
And one final twist. After the age of 65, you can withdraw HSA funds for any reason without penalty. While you’ll pay income taxes on these withdrawals just like you would for traditional IRA distributions, it’s comforting to know that you can access these funds easily in retirement. So in the rare event that you manage to avoid any major medical expenses throughout your life, the HSA still has you covered.
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