No matter retirement seems like for you, well being financial savings accounts may help you get there

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In today’s world, a unified idea of ​​retirement doesn’t suit everyone. Rather than defining retirement as the full completion of a 40-year professional career, individuals are increasingly retiring early, taking multiple smaller pensions, or working longer and only partial retirement.

Fortunately, there is a savings vehicle that offers specific benefits for each of these old-age provision concepts. Health Savings Accounts (HSAs) offer powerful features that allow account holders to easily achieve their successful version of retirement, whatever that means.

HSAs and traditional retirement

This is what most people think of when they think about retirement: work until you turn 65 and then stop working for the rest of your life. By putting money away for retirement during your career, you will earn time later in life to relax, spend time with family, and pursue hobbies.

For these individuals, HSA tax savings can be a significant benefit. Not only are HSA contributions tax-free or tax-deductible, HSA funds also grow tax-free and can be withdrawn tax-free to pay for qualified medical expenses. By taking advantage of HSA tax breaks, individuals can save money on their medical expenses and free up other funds for retirement. And if they want, they can even use HSA funds to cover healthcare expenses in the future.

Additionally, an HSA can be used to pay for medical expenses incurred by someone in your family. As an HSA account holder, you can use your HSA to cover the health costs of your spouse and taxpayers tax-free, even if they have a different health insurance plan. In contrast to an FSA, where you have to set a defined contribution amount for the entire year, you can also change your contribution level in the middle of the year. This flexibility allows HSAs to easily accommodate the changing spending and savings needs of individuals as they move into retirement.

Read: 6 Ways To Avoid The Healthcare Costs From Devouring Your Retirement Plans

HSAs and early retirement

This version of retirement has gained popularity in part thanks to the FIRE (Financial Independence, Retire Early) movement. By advocating a frugal lifestyle and saving a large portion of your paycheck, this move enables individuals to quit work, potentially much earlier than 65 years.

Read: Early Retirement Can Be Bad For Your Brain

For those looking to retire early, it is important to invest money quickly and to take advantage of compound interest over time. HSAs are attractive here because they have no usage restrictions and can be invested like a 401 (k) or IRA. This will maximize the individual’s ability to make money as quickly as possible and achieve financial independence. For these individuals, choosing an HSA provider that offers funds with low expense ratios is also a key, as these often overlooked fees can be a large part of their savings.

People seeking early retirement have big eyes on tax savings, and HSA contributions offer more tax savings than 401 (k) or IRA contributions. HSA account holders who make pre-tax HSA contributions through their employer’s Section 125 plans will allow FICA tax savings on those contributions. That’s an extra 7.65% on your paycheck. This additional opportunity to save money makes HSAs a popular choice for people looking to retire early.

HSAs and mini retirement

This view of retirement involves taking temporary breaks from work to travel or pursue hobbies and then return to work. Instead of having a big retirement after 40 to 45 years of work, this concept breaks that retirement down into smaller pieces throughout your life.

Mini-retirement advocates can move jobs many times over the course of their lives due to their non-work hours. HSAs shine here because they are privately owned, which makes them portable. Unlike FSAs, which stay with your employer, your HSA accompanies you from job to job so that you can continue to save without any problems.

Due to their mini-retirement and the subsequent new jobs, these people can also change health insurance frequently or possibly without health insurance. While the ability to provide additional HSA funds is dependent on an HSA-qualified health plan, account holders never lose the opportunity to spend the current funds in their account. That means, as long as account holders have funds in their HSAs, they can pay their medical expenses tax-free, even if their insurance situation changes.

Read: Healthcare Will Cost So Much – And Probably More, In Retirement

HSAs and partial retirement

This version of retirement is for people who don’t see them stop working altogether. Their financial situation may call for a longer career, or they may love what they do and keep working if they choose. In either case, these people do not experience the full end of work typical of traditional retirees.

Because HSAs do not require minimum distributions, they are ideal for people at this stage. They never have to withdraw funds from their HSAs before they have to, as is the case with a traditional 401 (k) or IRA. Your HSA funds can keep growing until they take them off.

In addition, after the age of 65, HSA account holders can withdraw HSA funds for non-medical expenses and only pay regular income taxes. For those who work longer hours, this offers additional flexibility in using their HSA funds. You never have to worry about having more HSA funds than healthcare expenses as your HSA dollars can easily be used on non-medical expenses.

Retirement now looks like 20 years of frugal living, so when you are 45 you can stop working, take breaks every five years, or continue the work you love into later years. No matter what retirement means to you, the robust features and unparalleled tax savings of your HSA will help you get there.

James Denision is the Marketing Director at HealthSavings Administrators, an HSA provider.

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