How can workers combine Health Savings Accounts (HSAs) with other savings vehicles to improve retirement outcomes?
Determining the ideal amount to save for retirement and when to withdraw assets depends on many factors. The challenge is further complicated when an individual has multiple accounts in which they can save. To help inform these decisions, this paper examines how HSAs, which provide powerful tax advantages and flexible distribution opportunities, can optimally be used alongside other savings vehicles to enhance retirement readiness.
- By bridging health insurance and retirement saving decisions, HSAs complicate individuals' choices regarding how much to save and when to withdraw assets across accounts.
- HSAs raise optimal tax-preferred saving, compared to a system with only tax-preferred illiquid retirement accounts and taxable liquid saving.
- Workers can improve their financial security by using both HSAs and defined-contribution retirement plans.