NCPA - National Center for Policy Analysis


January 7, 2008

Tax-advantaged health savings accounts (HSAs) are being used by some to supplement traditional retirement accounts, says the Wall Street Journal.

An HSA can provide a valuable source of retirement income alongside your 401(k) and individual retirement account if you let your funds grow, says the Journal:

  • You can fund your HSA with pretax or tax-deductible dollars, which then grow tax-free; any withdrawals you make to pay for qualified medical expenses aren't taxed either.
  • Money in the accounts can be invested in stocks, bonds, mutual funds and certificates of deposit.
  • Further, individuals who are 55 and older can make additional "catch-up" contributions to HSAs of $900 in 2008, and $1,000 in 2009 and thereafter.
  • Once you turn 65, distributions for nonmedical expenses are only taxed as ordinary income.

Another advantage to HSAs is that unlike an Individual Retirement Account -- where you are required to make mandatory distributions at age 70 ½ -- there are no time constraints on HSA withdrawals.  Moreover, your HSA dollars can fund other aspects of your retirement, says the Journal.

Source: Victoria E. Knight, "A Healthy Aid to Retirement," Wall Street Journal, January 5, 2008.

For text:


Browse more articles on Health Issues