Health Savings Accounts: For Today and Your Retirement Years

If you are not contributing to your health savings account (HSA), you miss out on a great way to save for health care expenses now and during retirement. HSAs allow you to save money tax-free through payroll deduction. Like traditional investments, some HSAs provide fund choices to increase accumulations With health care costs continuing to grow year over year, saving into an HSA plan makes sense. Benefits of HSAs include:

• Contributions to HSAs are tax-deductible.
• Contributions receive capital gains, dividends, and interest, which is tax-free.
• You pay no tax on withdrawals used for supplemental insurance and medical expenses.

HSA qualified expenses include co-insurance, dental, vision, prescriptions, insurance plan deductibles, and other costs not covered by your health insurance. If you have questions about what your HSA plan covers or how much you can contribute to your HSA each year, contact your HSA provider.

As you change jobs during your working years, your employers may have different health savings account plans.  When you leave an employer, the HSA funds left over are yours and should be rolled over into your new employer’s plan. HSAs can only roll-over into your new employer HSA, unlike a 401(K) that roll-over into an IRA. As you change employers throughout your career, you do not want to have multiple HSA accounts left at former employers, so move them into your current employer’s HSA plan.

You can move funds from an IRA into your HSA, but only if you are eligible to contribute to your HSA. Additionally, you need to do the transfer while covered by a high-deductible health plan. The IRA-to-HSA rollover includes a “testing period” that requires you to remain eligible for your HSA for twelve months following the transfer. Additionally, you must stay in your high deductible health plan until the testing period expires or face a 10% IRS penalty. Furthermore, you are only eligible for an IRA-to-HSA rollover once in your lifetime.

When you retire, HSAs can pay for things that are not covered by Medicare. Currently, Medicare's cost is deducted from beneficiary Social Security payments for doctor appointments and hospitalization but has limited coverage.

Retirees still need to carry supplemental insurance for dental, vision, prescriptions, and many other things that Medicare does not cover. Start saving into an HSA now to cover the supplemental insurances you will still need to purchase. The only exception to this is that once you enroll in Medicare, you cannot contribute to a health savings account even if still employed.

Financial planning involves planning for health-related expenses and making sure you prepare for any unforeseen financial impact through insurance coverage. If you have any questions regarding HSA accounts or other employment benefits such as your retirement account, contact our office anytime. 3250360.1