Is there a secret for ensuring a happy retirement? Health problems and financial stress may be the two biggest hurdles to overcome, and they often go hand-in-hand. Two of the best tools for fixing retirement are Health Savings Accounts and traditional retirement accounts.
Maximize Your Tax Breaks
Don’t let the uncertainty about Medicare and Social Security discourage you. Regardless of what politicians come up with in their fiscal cliff debate, you can start a Health Savings Account (HSA) and get tax breaks for doing it.
Actually, an increasing number of people are getting an HSA-qualified plan just so they can use an HSA like a traditional IRA with fringe benefits. Like IRA or Roth funds, HSA money grows with tax-free earnings and the balance rolls over at yearend to build a substantial source of retirement income.
HSA Fringe Benefits Mean Savings
Unlike traditional retirement accounts, an HSA is accessible at any age to pay for dental and health care for you and your whole family. You can wait until you have to pay the dentist, and run money through your HSA to make it tax deductible. Or, you can make the maximum HSA contribution for years and let the balance grow without paying taxes on earnings.
Unlike other retirement accounts, an HSA makes health care expenses tax deductible. It lets you save while still keeping access to those funds to pay for health care before and after you retire.
Maximize Your Social Security Benefits
Remember you have to pay higher income taxes on social security benefits if you are in a high tax bracket. To stay in the lowest possible bracket, it really helps to withdraw a little every year from pre-tax accounts like 401(k)s and after-tax accounts like Roth IRAs.
IRAmarket’s CEO Bill McNulty says seniors can save money by staying in a low tax bracket during retirement. He emphasizes that people of retirement age who have not fully retired also have advantages. They can still contribute to their Roth IRA after age 70. And, get tax-free investment gains for later years.
Amanda Grace is a contributing author to HSA for America and an expert on Health Savings Accounts.