the retirement planning hack can be a secret weapon for tax-free growth.
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quick tax tip
with art werner
cpe today
when most people hear “hsa,” they think of medical expenses and high-deductible health plans. but in the latest episode of quick tax tip, tax educator and attorney art werner urges tax professionals—and their clients—to look deeper.
in his signature style, werner reframes the health savings account (hsa) as one of the most underrated retirement planning tools available today.
“i don’t look at the hsa as a way to pay for medical bills,” says werner. “i look at it as a disguised retirement plan.”
many taxpayers—and even some practitioners—limit their view of the hsa to a reimbursement vehicle for immediate out-of-pocket costs. but werner explains that this account can function much like a roth ira, offering triple-tax benefits: contributions are tax-deductible, growth is tax-free, and qualified withdrawals for medical expenses are also tax-free.
here’s the twist: you don’t have to take reimbursements immediately.
say you fund your hsa this year and incur a $1,000 out-of-pocket medical cost. according to werner, the smartest move isn’t to pull from the hsa immediately. instead, pay the bill out of pocket, save the receipt, and let the hsa balance grow untouched.
“five years from now, i need that $1,000. i pull that receipt out—it’s a tax-free reimbursement,” he explains. “in the meantime, that money has been compounding tax-free.”
that receipt becomes a ticket to a future tax-free withdrawal while the money left in the hsa grows, functioning like a stealth retirement fund.
what makes this strategy especially valuable is that hsa contributions are allowed in addition to contributions to iras or employer retirement plans. for higher-income individuals looking to max out their tax-advantaged savings, this can be a game-changer.
“this is where the hsa is so misunderstood,” werner emphasizes. “it’s not just a medical fund—it’s a retirement planning tool that can extend your tax strategy well into the future.”