The Vanguard Target Retirement 2055 Fund is a strong choice for long-term retirement savings due to its low expense ratio and diversified investment strategy. An HSA is beneficial for managing healthcare costs with tax advantages, especially if you have a qualifying high-deductible health plan. The best choice depends on your specific financial goals: retirement savings versus healthcare expense management.
| Attribute | Target Date Funds (Vanguard Target Retirement 2055 Fund) | Health Savings Account (HSA) |
|---|---|---|
| Name | — | Health Savings Account (HSA) |
| Expense Ratio | — | Varies by provider and investment options |
| Investment Options | — | Stocks, bonds, mutual funds, and ETFs |
| Tax Advantages | — | Triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Employer contributions are excluded from taxable income. |
| Contribution Limits | — | For 2025, $4,300 for individuals and $8,550 for families. For 2026, $4,400 for individuals and $8,750 for families. Those 55 and older can contribute an additional $1,000 as a catch-up contribution. |
| Withdrawal Rules | — | Before age 65, withdrawals for qualified medical expenses are tax-free. Withdrawals for non-qualified expenses are subject to income tax and a 20% penalty. After age 65, withdrawals for non-qualified expenses are subject to income tax but not the penalty. |
| Employer Matching (if applicable) | — | Some employers offer matching contributions to employee HSAs, similar to 401(k) matching. Employer contributions are tax-free but count toward the annual contribution limits. |
| Investment Risk Level | — | Depends on the chosen investment options, ranging from conservative choices like money market funds to more aggressive investments like stocks. |
| Historical Performance | — | Data is available from the HSA provider for specific investment options, but past performance does not guarantee future results. |
| Account Fees | — | Monthly maintenance fees, investment fees, fees for printed statements, account closure fees, and non-sufficient funds fees. |
| Availability (eligibility requirements) | — | Must be enrolled in an HSA-eligible high-deductible health plan (HDHP), not covered by another health plan, not enrolled in Medicare, and not claimed as a dependent on someone else's tax return. |
| Portability | — | HSAs are portable, meaning you keep the account even if you change jobs or health plans. |
| Healthcare Expense Coverage (for HSA) | — | Deductibles, copays, coinsurance, prescription medications, dental and vision care, acupuncture and chiropractic care, over-the-counter medications, fertility treatments and family planning, substance abuse and wellness treatments. |
| Price | — | Not available |
| Ratings | — | Not available |