Health Savings Account (HSA)
Triple tax advantage: deductible in, tax-free growth, tax-free medical withdrawals.
What is Health Savings Account (HSA)?
Available with a qualifying high-deductible health plan. The only account with all three tax benefits at once. After 65, non-medical withdrawals are taxed as ordinary income without penalty, making it a de facto retirement account.
Health Savings Account (HSA): a worked example
Paying medical costs out of pocket and letting the HSA compound for decades maximizes the benefit.
More terms in Taxes & Account Types
Capital Gain (Short-Term vs. Long-Term)
Profit on a sale, taxed by how long you held it.
Cost Basis
What you paid, used to compute gain or loss on sale.
Wash Sale Rule
A loss is disallowed if you rebuy the same security within 30 days.
Tax-Loss Harvesting
Realizing losses to offset gains and up to $3,000 of ordinary income.
Qualified Dividend
A dividend taxed at long-term capital gains rates.
Traditional IRA / 401(k)
Deduct now, grow tax-deferred, pay ordinary income tax on withdrawal.
Roth IRA / Roth 401(k)
Pay tax now, grow tax-free, qualified withdrawals are untaxed.
Required Minimum Distribution (RMD)
Mandatory annual withdrawals from tax-deferred accounts starting at 73.