Maximizing Savings: The Benefits of Funding an HSA Over Traditional Retirement Accounts
Funding a Health Savings Account (HSA) before a traditional IRA or 401(k) can be advantageous due to the additional tax benefits and flexibility it offers. While traditional retirement accounts provide tax breaks and tax-deferred gains, HSAs provide tax-free contributions, gains, and withdrawals for qualified healthcare expenses. Unlike traditional retirement accounts, HSAs allow penalty-free withdrawals for medical expenses at any age. Additionally, at age 65, HSA withdrawals for non-medical purposes are no longer subject to penalties, effectively converting the HSA into a traditional retirement account. Prioritizing HSA contributions can provide savers with the best of both worlds, but eligibility is contingent on having a compatible health insurance plan.