Suppose you are covered by a high-deductible health plan (HDHP) and not contributing to a health savings account (HSA). In that case, you are missing out on a great way to cover your healthcare expenses. HSAs allow you to save money tax-free through payroll deductions. Then use the tax-free funds to pay for qualifying health care services and items. With healthcare costs continuing to rise annually, contributing to an HSA for healthcare expenses may be appropriate for your situation. Here are some things to know about HSAs:
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, your HSA provider and employer's HR department can help. You can also learn more online at How HSAs Work. As you change jobs, your employers may have different health savings account plans. When you leave an employer, the HSA funds are yours and can transfer into your new employer's HSA plan. HSAs can only move into your new employer's HSA, unlike a 401(K), which may roll over into an IRA. Throughout your career, it's essential to combine your HSA funds into your new plan when you change employers. Doing so reduces the number of HSA accounts started at former employers that you may need to remember over time. You can move funds from an IRA into your HSA, but only if you are eligible to contribute to an HSA. Additionally, you need to do the transfer while covered by a high-deductible health plan (HDHP). 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 and go on Medicare, you can no longer contribute to your HSA. This is because to contribute to an HSA, you cannot have any other health insurance besides an HDHP. The good news, however, is that the tax-free funds in your HSA can be used for healthcare expenses not covered by Medicare. Retirees still need supplemental insurance for dental, vision, prescriptions, and many other things that original Medicare does not pay for. You can start saving with an HSA today to cover the supplemental insurances you will need to purchase when you retire. Remember, once you enroll in Medicare, HSA contributions are no longer allowed, even if you are still employed. So, now's the time to save and make catch-up contributions if you are 55 or older. Financial planning involves funding health-related expenses and preparing for unforeseen circumstances, even health situations. Don't hesitate to contact our office anytime if you have questions regarding HSA accounts or other employment benefits, such as your retirement savings through your employer. Together we can ensure your financial plan and healthcare options are appropriately aligned. Courtesy of Fresh Finance. |
Health Savings Accounts for Today and Your Retirement Years
