If you aren’t utilizing your health savings account (HSA) at your employer, you’re missing out on a great way to save for retirement health care expenses. HSAs allow you to set aside money to be used to pay for medical expenses now during your working years, and later in retirement. HSAs allow you to keep the unused money well into retirement. No longer is HSA money ‘forfeited’ if unused at the end of the calendar year.
The only exception to HSAs is that once you enroll in Medicare, you’re unable to contribute to a health saving account. 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 for medical expenses
HSA qualified expenses include co-insurance, dental, vision, prescriptions, insurance plan deductibles, and other expenses not covered by your health insurance. When you retire, HSAs can be used to cover items that are not covered by Medicare. If you have questions about what is covered under your HSA plan, and how much you can contribute to your HSA each year, contact your HSA provider.
As you change jobs during your working years, it is possible that your employers may have different health savings account plans. When you leave an employer the HSA funds left over are yours and can be rolled over into your new employer’s plan. HSA funds can only be rolled over into your new employer HSA, unlike a 401(K) that can be rolled over into an individual IRA. As you age, you don’t want to have numerous HSA accounts left at former employers, so start bringing them with you as you change jobs!
Part of financial planning involves planning for expenses in retirement and trying to determine a retirement budget. With the rising cost of health care, putting aside extra into an HSA plan now to use later in retirement makes sense. Currently, the cost of Medicare is deducted from beneficiary Social Security payments, and retirees still need to carry supplemental insurance for dental, vision, prescriptions, and many other things that Medicare doesn’t cover. Start saving now in order to have money in retirement to cover these supplemental insurances you will need to pay for.
If you have any questions regarding HSA accounts or any other employer benefits such as your retirement account, feel free to contact our Las Vegas Financial Advisory office for an appointment.