Introducing The Stealth IRA

High deductible healthcare plans with Health Savings Accounts (HSA’s) are increasingly popular.  Using HSA’s as a secret/stealth way to save more money for retirement might make sense for all those maxing out their 401(k) and looking for more deductions.

Here are the basics about the “Stealth IRA” (HSA):

  1. Contributions to an HSA are deductible either pretax with salary reductions or as an above line deduction on your taxes much like an IRA.
  2. Unlike a Flexible Spending Account (FSA) you never forfeit the money in a HSA if you don’t use it or change jobs.
  3. The money can be invested and will continue to grow.
  4. If you use the money for qualified medical expenses the withdrawals from an HSA are tax-free.
  5. After the age of 65 you can use the money for any purpose (like retirement) and only have to pay tax on it just like you would with a IRA withdrawal.

After you max out your 401(k) plan, contribute the maximum to your “stealth IRA” and let it serve dual purposes.  It can provide money for healthcare expenses and money for retirement.

Best of luck!