This lesser-known retirement savings tool is loaded with tax benefits – Fox Business
Posted: September 30, 2020 at 1:51 am
Fox Business Flash top headlines are here. Check out what's clicking on FoxBusiness.com.
No matter your age or income level, your goal should be to pay the IRS as little tax as possible. And the choices you make with regard to retirement savings could have a huge impact in that regard. In fact, many workers overlook one important long-term savings tool that's actually loaded with tax benefits. And if you're forgetting it, too, you're doing yourself a major disservice.
3 THINGS TO DO IMMEDIATELY IF YOU HAVE NO RETIREMENT SAVINGS
Not everyone is eligible to contribute to ahealth savings account, or HSA. To qualify, you must be enrolled in a high-deductible health insurance plan, the definition of which changes from year to year. For 2020, you'll need an individual deductible of $1,400, or a family level deductible of $2,800.
But assuming youdoqualify, HSAs are unique in that unlike other retirement savings plans, they offer three distinct tax benefits:
By contrast,IRAs and 401(k)s, which are commonly used to save for retirement, don't offer the same number of tax benefits. With a traditional IRA or 401(k), your contributions go in pre-tax, and investment growth is tax-deferred, but withdrawals are subject to taxes. With a Roth IRA or 401(k), contributions are made with after-tax dollars, while investment gains and withdrawals are tax-free. These accounts are certainly worth funding, but it's also worth incorporating an HSA into your retirement savings strategy. Though you can use an HSA outside of retirement, these accounts are best maximized when you contribute more than what you need in the near term, invest your money for added growth, and then carry those funds all the way into your senior years, when you're likely to need that money the most.
4 RETIREMENT PLANNING STRATEGIES TO LEAN ON IN UNCERTAIN TIMES
Another thing you should know about HSAs is that normally, you'll be penalized for removing funds from your account for non-medical purposes, the same way you'll face penalties if you withdraw from an IRA or 401(k) prior to age 59 1/2. However, once you turn 65, you're actually allowed to remove money from an HSA for any reason. If you don't spend that money on medical expenses, you'll be taxed on your withdrawal -- but you'll still get the flexibility to take money out as a senior and use it as you wish.
The contribution limits for an HSA change from year to year, and currently, you can put in up to $3,550 if you're contributing as an individual, or up to $7,100 if you're putting money in at the family level. However, like IRAs and 401(k)s, HSA offer a catch-up contribution to older workers, albeit at a slightly later age. Once you turn 55, you can put an extra $1,000 a year into your HSA, bringing your total for 2020 up to either $4,550 or $8,100.
Best of all, unlike flexible spending accounts, you're not required to commit to an annual contribution in advance. Rather, you can adjust your contributions at any time. This means that if you've only allocated $1,000 to your HSA this year when you're actually entitled to contribute $3,550, you can still go ahead and put in that remaining $2,550.
RETIRING SOON? ANSWER THESE 3 QUESTIONS TO DECIDE WHETHER TO RELOCATE
It's easy to disregard HSAs as a retirement savings tool since, as the name implies, they're an account intended to cover the cost of near- and long-term medical expenses. But the flexible nature of HSAs makes them perfect for your later years, and given that the typical 65-year-old couple today is expected to spend$295,000on medical care throughout retirement, having a dedicated source of healthcare income is hardly a bad thing. Just as importantly, it never hurts to lower your tax burden as a working adult and as a retired one. Be smart with your HSA, and you'll enjoy less taxes up front, and a tax-free source of income when you're older.
CLICK HERE TO READ MORE ON FOX BUSINESS
Visit link:
This lesser-known retirement savings tool is loaded with tax benefits - Fox Business
- Ask Larry: Will Changes In The Full Retirement Age Reduce My Social Security Benefit At 70? - Forbes - December 22nd, 2020
- 5 Unexpected Sources of Retirement Income -- All Related to Your Home - Motley Fool - December 22nd, 2020
- Considering retirement? Here's why you need to talk about it. A lot. - Minneapolis Star Tribune - December 22nd, 2020
- 3 Moves to Make Right Now if You Want to Retire Early - The Motley Fool - December 22nd, 2020
- Dont Miss These CARES Act Retirement Benefits - Forbes - December 22nd, 2020
- Supreme Court Justice Stephen Breyer, 82, says he will retire 'eventually': 'Hard to know exactly when' - Fox News - December 22nd, 2020
- Don't forget to check your retirement plan. Here are moves to make before the year is out - CNBC - December 22nd, 2020
- Its Time to Change How We Talk about Retirement, Starting with the Word Itself - Kiplinger's Personal Finance - December 22nd, 2020
- LeBron on course to join legends with jerseys retired by multiple teams - NBA.com - December 22nd, 2020
- I'm retired and won't live to see my mortgage paid off. Should I refinance to lower my monthly payment? - MarketWatch - December 22nd, 2020
- Scarborough superintendent plans to retire at the end of June - pressherald.com - December 22nd, 2020
- Katie Compton winding down storied career, will retire in 2022 - Cyclingnews.com - December 22nd, 2020
- How This Couple Retired At 55 With Just $200,000 In Their Roth IRA Account - Yahoo Finance - December 22nd, 2020
- Retired UW computer science professor embroiled in Twitter spat over AI ethics and cancel culture - GeekWire - December 22nd, 2020
- There Are 5 Types of Retirement Savers, New Research Says. Which One Are You? - Barron's - December 16th, 2020
- IRA Guru Ed Slott On Taxes, Retirement & Roth IRAs - Forbes - December 16th, 2020
- Soothing the Retirement Fears of Middle-Class Millionaires - ThinkAdvisor - December 16th, 2020
- Center for Retirement Research: Public pension plans should avoid investing based on social and environmental movements - Yankee Institute - December 16th, 2020
- Tesla Fever: Understanding Index Funds And How They May Hurt Your Retirement - Forbes - December 16th, 2020
- Grand Forks School Board weighs budget reduction, early retirement concerns - Grand Forks Herald - December 16th, 2020
- Andy King to Retire From Arrow Electronics, Inc. - Business Wire - December 16th, 2020
- Top Ford labor negotiator Gary Johnson to retire after 34 years - Detroit Free Press - December 16th, 2020
- Northam to spend $100 million to reduce teacher retirement liabilities - Richmond.com - December 16th, 2020
- Beware these 15 worst states for taxes on your retirement - Yahoo Finance - December 16th, 2020
- 4 pieces of advice to help you retire comfortably, according to people who have done it - Business Insider - December 16th, 2020
- Common Mistakes That Could Derail Your Retirement and How to Avoid Them - Barron's - December 16th, 2020
- Can You Retire a Millionaire With Index Funds? - The Motley Fool - December 16th, 2020
- A Happier Retirement Could Be Yours if You Do These Things - Journal Gazette and Times-Courier - December 16th, 2020
- Report: This Is How Much It Costs to Retire Happy - The Motley Fool - November 27th, 2020
- Retirement reform likely slips to 2021 as Washington finalizes end-of-year spending - Yahoo Finance - November 27th, 2020
- Man fatally shot by relative in FishHawk Ranch home could be retired Marine officer - Tampa Bay Times - November 27th, 2020
- The 10 Best Places to Retire in America - Money - November 27th, 2020
- Pedro Hernandez, retired justice of the peace, dies - Billings Gazette - November 27th, 2020
- Cover Your Biggest Retirement Expense With $300 Monthly in This ETF - Waco Tribune-Herald - October 19th, 2020
- I want to retire next year, but I have $25,000 in credit card debt and a major monthly mortgage payment I also live with my three kids and ex -... - October 19th, 2020
- With interest rates near record lows, retirement may have to wait - Quartz - October 19th, 2020
- 60% of Medicare enrollees worry about health care costs. Here's the best way to pay for them in retirement - USA TODAY - October 19th, 2020
- These are the 5 best places to retire in America - CNBC - October 19th, 2020
- Forget the Rent, Collect the Yield: Why Investors Looking to Retire Early Should Consider REITs - Barron's - October 19th, 2020
- 4 good ways to go broke in retirement - Fox Business - October 19th, 2020
- Americans Are Facing a $3.83 Trillion Retirement Shortfall. Here's What to Do About It - North Platte Telegraph - October 19th, 2020
- Will There Be an End-of-Year Retirement Exodus? - GovExec.com - October 19th, 2020
- How much you need to invest every month to retire with $1 million to $3 million, broken down by age - CNBC - October 19th, 2020
- South Africas unusual electrical plugs, sockets to be retired - Quartz Africa - October 19th, 2020
- A $5,500 withdrawal from your 401(k) could cost you $30,000 - USA TODAY - October 19th, 2020
- 'Blazing the pathway': Retired teacher could become Kansas' first transgender lawmaker - NBC News - October 19th, 2020
- 5 ways HR can help millennials be smarter than their parents about retirement - Employee Benefit News - October 19th, 2020
- Siouxland veterans and service men and women honor retired flags - KTIV - October 19th, 2020
- Im 63, my husband is 70, well have $90,000 a year in retirement how can we claim our Social Security benefits? - MarketWatch - October 19th, 2020
- Retirement investors: Why it's time to stop using the 4% rule - Fox Business - September 30th, 2020
- Regs on retirement-payment withholding updated - Accounting Today - September 30th, 2020
- Empower to buy Fifth Third's $6 billion retirement business - InvestmentNews - September 30th, 2020
- Retirement Savers: 4 Easy Investing Strategies to Implement Now - SCNow - September 30th, 2020
- Need another income stream? Here are 5 reasons to invest in dividend-paying stocks for retirement. - USA TODAY - September 30th, 2020
- 8 Ways to Save for Retirement as a Freelancer - Entrepreneur - September 30th, 2020
- If you're saving for retirement and are in your 50s, it may be time to reassess your plan - CNBC - September 30th, 2020
- Op-ed: The pandemic has forced firms to offer early retirement plans. Heres what to consider before you decide to pack it in - CNBC - September 30th, 2020
- Even Seniors Who Are Good Savers Stand to Fall Short in Retirement, Report Concludes - Barron's - September 30th, 2020
- Women's Health Care Costs in Retirement Projected to be $200000 More than Men's - Business Wire - September 30th, 2020
- Trinseo Announces the Retirement of Stephen M. Zide and Christopher D. Pappas from Its Board of Directors - Business Wire - September 30th, 2020
- 5 Reasons to Invest in Dividend-Paying Stocks for Retirement - The Motley Fool - September 30th, 2020
- Gardner Fire Chief Richard Ares honored on the eve of his retirement as U.S. Rep. Lori Trahan officially announces $240K grant for his department -... - September 30th, 2020
- Here's what your monthly budget will look like if you retire with $2 million - CNBC - September 30th, 2020
- Parmer to retire as Baptist CEO after more than 30 years - Beaumont Enterprise - September 30th, 2020
- 3 Pitfalls of Only Using a 401(k) for Retirement - The Motley Fool - September 30th, 2020
- Whats your takeoff point? The moment youve saved enough for retirement - The Dallas Morning News - September 30th, 2020
- Your retirement probably won't be anything like your parents'...and that's not good news - MarketWatch - September 23rd, 2020
- This study finds that those who retired early lost brain power - MarketWatch - September 23rd, 2020
- With remote work flexibility, some people opt to relocate ahead of their retirement - CNBC - September 23rd, 2020
- My grandma's secret to a comfortable retirement for the past 22 years - Business Insider - September 23rd, 2020
- Most Americans are behind on their retirement savingshere are some tips to catch up - CNBC - September 23rd, 2020
- Retirement is coming, but it won't be smooth sailing - WATN - Local 24 - September 23rd, 2020
- If youre home-rich but cash-poor, heres what to know about reverse mortgages - CNBC - September 23rd, 2020
- Here's how to take the mystery out of picking the best retirement savings plan for you - CNBC - September 23rd, 2020
- CalSavers will help people save for retirement. What to know - Los Angeles Times - September 23rd, 2020
- College-Based Retirement Communities Have Been Upended by Covid. Are They Still Worth It? - Barron's - September 23rd, 2020
- 3 things to do immediately if you have no retirement savings - Fox Business - September 23rd, 2020
- What NOT to do with your retirement savings in a crisis - MarketWatch - September 23rd, 2020
- Fortis Inc. Announces Retirement of President and CEO Barry Perry and Appointment of David Hutchens as Successor Effective January 1, 2021 -... - September 23rd, 2020
- National Institutes of Health staffer to 'retire' after being outed as author of online attacks against Dr. Anthony Fauci - USA TODAY - September 23rd, 2020