You will have a lot of out-of-pocket expenses for health care after you retire.  Personal finance experts estimate that an average retired couple age 65 will need at least $300,000 to cover health care expenses in retirement.  Maybe even more.

The time to save is now, not after age 65, and the best way to do that just might be your Health Savings Account (HSA).

Not everyone can have an HSA. But you can if you’re self-employed or your employer doesn’t provide health benefits.

An HSA is much like an IRA for health care.  An HSA can provide you with three tax benefits:

  1. You or your employer can deduct the contributions, up to the annual limits.
  2. The money in the account grows tax-free (and you can invest it in many ways).
  3. Distributions are tax-free if used for medical expenses.

Nothing else gives you these three benefits.  You also have flexibility on how you use it.  If you maximize your contributions and take few distributions over many years, the HSA will grow to a hefty sum.

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