By Julia Carpenter Nov. 7, 2019 5:30 am ET The health savings account, or HSA, can be a powerful savings tool—if you approach it the right way.
“I don’t think most people understand HSAs from the get-go,” said Roy Ramthun, a consultant who specializes in HSAs. “From my experience, the HSA gets 30 seconds of the health benefit presentation. It’s all about the insurance, and then ‘Oh, you have this.’” Eric Remjeske, president of Devenir Group LLC, said since Congress authorized these accounts in 2003, the number of accounts and the average account balance have both grown over time. By 2011, there were 6.2 million HSAs, according to Devenir Research; this past June, that number had grown to 26.3 million.
“Advisers are now asking the question: Where do you put the money, 401 or HSA?” said Steve Christenson, executive vice president at Ascensus, a retirement and college savings service provider. “They’re seeing more of a balance amongst consumers.” One approach to the HSA is to consider paying for current medical expenses out-of-pocket after establishing the HSA; you can then file for reimbursement in retirement. This way, you can supplement your retirement income—entirely tax-free.
An HSA can also be considered as a “rainy day” medical fund that works in tandem with your 401 to help offset the cost of out-of-network care, over-the-counter medicines or other things your insurance may not cover. Even if you’re healthy now, studies show you could still be spending much more on medical expenses once you enter retirement.
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