Your health savings account can be a retirement planning tool [Personal Finance]

When you retire, one of the biggest expenses you may face on a regular basis is health care. Even if you are registered with Medicare, you may need to pay for various medical expenses out of your own pocket – and, in general, the costs are rising rather than falling. Fortunately, there are tools that can help make these costs more manageable, one of which may be a health savings account or HSA. If HSA is available to you, you can explore its potential benefits. Here is the primer.

Purposeful savings tool with taxes

HSAs are savings plans related to high-deductible health insurance policies. Many employers offer the option of choosing such a policy, but if you are retired, it may be available to you if you purchase individual coverage. HSAs are funded by dollars before taxes. For those who are still working, this can be done by payroll deductions (done before income tax is calculated from each salary). Otherwise, it can be done through non-tax contributions. Money in the account can be invested and grow on a deferred basis. If funds are used to pay for qualified medical expenses, they can be deducted without federal taxes and, in most cases, without state taxes (consult your tax advisor to find out what rules apply in your case).

In 2022, you can contribute up to $ 3650 to the HSA ($ 4650 for an individual aged 55 and over). A couple can contribute up to $ 7,300 a year (or $ 9,300 if both are over 55).

Flexible account for retirees

Any dollars left in your HSA may continue to accumulate in your account and be available to reimburse medical expenses upon retirement. At this time, you can withdraw dollars from your HSA on a tax-free basis to cover expenses such as:

• Medicare Awards

• Health insurance deductibles

• Care for teeth, eyesight and hearing

• Part of premiums for long-term care insurance that qualifies for taxation

• Other medical expenses out of pocket.

• Good planning makes a difference

You can participate in the HSA under the age of 65, the age at which you are eligible to enroll in Medicare. By saving in the plan, you can try to keep as many assets in the HSA as possible to take full advantage of them as a means of retirement savings.

Talk to your financial advisor to learn more about how HSA can be included in your comprehensive retirement plan.

Bronwyn L. Martin is a financial advisor and certified financial advisor to Martin’s Financial Consulting Group, a financial wealth advisory practice of Ameriprise Financial Services LLC. in Kenneth Square and Le Havre de Grace, Maryland. To contact her:

Back to top button