Tricks for Saving with Your Health Savings Accounts During Retirement

HSAs, or health savings accounts, are a part of a lot of employers standard benefits offered to employees. HSAs are good for shuffling your pre-taxed income into a fund that you can use for medical expenditures. However, there are sometimes exceptions that should be made, and it may be confusing to know where and how to invest in your future.

Offered here are some tricks for saving with your HSA during retirement.

First off is a way to get some tax relief. Because the HSA is often used in addition to a different health plan with a higher deductible, the IRS says you can use either a medical trust or a custodial account to pay for certain procedures, that aren’t taxed. This is on top of the money in the HSA accruing untaxed as well. That is due to the Federal Insurance Contributions Act, which says you can contribute tax-free to the HSA as long as they are done directly through your paycheck.

Second off is the fact with 53 percent of big companies offering to their workers and HSA, only 24 percent of those eligible take advantage of it. HSAs are not as common or as utilized as they should be, and if you meet the IRS’s eligibility requirements to enroll tax-free, you should be taking advantage of it.

Some of those IRS requirements are things like that you have to be covered by a high deductible health plan, but have no other insurance and not be using Medicare. You also can be dependent on someone else’s tax form. You can contribute to your HSA up to $3,500 if your single, or up to $7000 if your part of a family plan as long as you meet all the minimum requirements. With HSAs you can rollover any contributions you don’t use from year to year, so nothing is wasted.

Thirdly, the HSA is intended for the retired class, but people who have these accounts will often dip into it for medical expenses they may have before retirement. This is something you shouldn’t do because it is counter-intuitive of what the HSA was designed for, and when you do retire, the account will have nothing in it.

Of course, if you’re in a tight spot with a medical bill, and you have an HSA, then it might not be an option, but if you can, you should save the HSA for retirement, in fact, using the money to invest in other funds in order to make the account grow quicker.

Even though you can no longer contribute tax-free to your HSA once you are a part of the Medicare program, you’d still be able to use that money tax-free to pay for any medical expenses you or your partner might have.

Lastly, if you have some medical bills coming in, know that your HSA is not a fund that you need to use for that if you don’t want to. You don’t have to use it for medical expenses at all, and only incur a 10 percent penalty for using it more like an account for saving money alone. In this regard, it is more like an IRA, though without the required minimum distribution when they hit certain age thresholds, making it better than an IRA for growing tax-free funds.

The best course of action, with any health or retirement plan, is to shop around, not just for insurance and mutual funds, but for any medical procedure, you have too. The less money you waste on unnecessary expenditures, the more you can have sitting in your HSA today.