The "Triple Tax-Advantaged" Secret: Why Your HSA is Better Than Your 401(k)

If you’re over 55 and planning for the future, you’ve probably been told to max out your 401(k) or IRA. While that’s solid advice, most people in Northern Nevada are overlooking the one of the most powerful tax-saving tool in the IRS code: the Health Savings Account (HSA).

At Jaacovi Tax & Bookkeeping, we often call the HSA the "Super IRA." Why? Because it’s the only account that offers a triple tax advantage that traditional retirement accounts simply can't match.

What is the "Triple Tax Advantage?"

Most retirement accounts make you choose when you want to be taxed. With a Traditional IRA, you save now but pay later. With a Roth, you pay now but save later.

The HSA says: "Why choose?"

1. Tax-Free In: Contributions are 100% tax-deductible (reducing your taxable income today).

2. Tax-Free Growth: Your investments grow inside the account without the IRS taking a penny.

3. Tax-Free Out: Withdrawals are completely tax-free when used for qualified medical expenses.

The "Over 55" Power Move

If you are 55 or older, the IRS allows you to "supercharge" your HSA with a Catch-Up Contribution.

For 2026, the limits are increasing:

• Self-Only Coverage: $4,400 + $1,000 catch-up = $5,400 total

• Family Coverage: $8,750 + $1,000 catch-up = $9,750 total

Pro Tip for Married Couples: If both you and your spouse are over 55, you can each contribute an extra $1,000 catch-up. However, the second $1,000 must go into a separate HSA in the other spouse's name. It’s a small administrative step that nets you an extra $1,000 in tax-free savings.

The "65+ Stealth Retirement" Strategy

Many people worry about "locking" their money away in an HSA. What if you stay healthy and don't need it for doctor visits?

Here is the secret: Once you turn 65, the 20% penalty for non-medical withdrawals disappears. At that point, your HSA functions exactly like a Traditional IRA. You can take money out for a vacation, a new truck, or a home renovation. You’ll just pay ordinary income tax on it—no different than your 401(k) or IRA.

But, if you use it for a medical bill (including Medicare premiums!), it stays 100% tax-free. Your 401(k) can't do that.

Is an HSA Right for You?

To open an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP) and not yet enrolled in Medicare. For many of our clients in Carson City and Reno, switching to an HDHP not only lowers monthly premiums but also opens the door to these massive tax savings.

The Bottom Line: If you have the cash flow, you should almost always max out your HSA before adding extra to your 401(k) (after you've hit your employer match).