Health savings accounts (HSAs) offer substantial tax advantages for retirement savings, allowing individuals to save pretax money for medical expenses. An analysis indicates that starting contributions at age 25 and maximizing annual contributions can potentially lead to a $1 million balance by retirement age, assuming a consistent annual investment return. However, participants must avoid spending from the account for medical needs and instead let funds grow untouched. HSAs can also be utilized for nonmedical withdrawals after age 65, although such amounts will be taxed as ordinary income.
To amass $1 million in health savings accounts by retirement, individuals must start contributing at a young age, maximize annual contributions, and avoid withdrawing funds.
Health savings accounts provide substantial tax advantages, allowing savers to grow investments tax-free and withdraw tax-free for eligible medical expenses, making them a strategic retirement tool.
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