The government always gets their money back - or do they? What if there was a retirement account that when contributing has the tax deductibility of an IRA and in retirement, the tax-free nature of a Roth IRA? Wouldn't THAT be cool! The more tax free funds we have in retirement, the less our overall effective tax rate.
Good news - it exists today!
It turns out that HSAs - Healthcare Savings Accounts - funded with pre-tax money - can be used in retirement for medical expenses tax-free! Most people think of HSAs as a convenient way to offset the near term cost of out-of-pocket medical expenses tax-free. If you're fortunate, and need less money to pay medical expenses, then you get the benefit of investment growth inside the account.
When you reach 65, HSAs can be used either as a retirement account - at which time the dollars taken out are taxed as ordinary income just like an IRA. However, they can continue to be used for medical expenses tax-free!
Since you will inevitably have out-of-pocket medical expenses at ALL times of your life, including in retirement, then the HSA essentially becomes a Roth IRA in retirement!
A quick tutorial on HSA's. They can only be funded before age 65 and only when you are covered by a HDHP - High Deductible Health Plan.
And HSAs can be invested. Not just invested with typical high expense poor-performing actively managed retail mutual funds you would encounter on your own or with a mainstream bank or stock broker - even better they can be invested with a smart evidence-based investing approach using an Investment Advisor like O'Reilly Wealth Advisors. Yes we can invest your HSA funds just like we invest for our sophisticated investors looking for the best long term returns that evidence-based investing provide.
HSAs and the rules surrounding them are very flexible! For example, you may save all your receipts and reimburse yourself years later if you wish. Or once per year - whatever is convenient is for you. Your HSA is your money. You can move it to a another HSA provider/platform that comes with better funds, lower fees, better service and investment advice.
The only inflexibility is funding the HSA. You can only fund your HSA when you are currently insured with a High Deductible Health Plan (HDHP). Your insurance agent or employer will let you know if you have a HDHP.
So if you have a HDHP, fund it to the max allowed, or the max you can afford, while you still can!
Invest those HSA funds wisely - call us for help! Most HSAs providers do not have high performing evidence-based investing available. You want to have the most available funds for medical expenses in retirement as possible!