Table of contents

Retirement

Covering the Medicare gap

Medicare will not cover all medical expenses after retirement. The average American couple will need $265,000 to cover out-of-pocket healthcare costs in retirement. An HSA, when managed properly, is a great option to cover the expenses that Medicare will not. Additionally, an HSA can be used to pay for dental, vision and hearing expenses, which may not be covered by Medicare.

HSAs vs. other retirement accounts

HSAs provide the greatest amount of tax relief of any account type for the following reasons:

  1. Contributions are tax-free
  2. Earnings are not taxed
  3. When used for qualified medical expenses, withdrawals are not taxed
Putting money in Account Taking money out

Not taxed
HSA    Used for qualified medical expenses  Not taxed
   Not used for qualified medical expenses  Taxed

Not taxed
IRA & 401(k)     Taxed

Taxed
Roth     Not taxed