« What Can A Health Savings Account Do For Your Family | Main | 4.5 million enrolled in Health Savings Accounts »
June 06, 2008
Using Your Health Savings Account for Retirement
Many individuals are now using Health Savings Accounts as a way to supplement their traditional retirement accounts, such as 401ks. A Health Savings Account (HSA) allows users to pay for health related expenses, such as office visit copays, deductibles, and medication. Users can also use the accounts to save for future medical expenses, premiums for health insurance, or even Medicare premiums.
In order to participate in an HSA, a person must be covered by a high-deductible health plan (HDHP), which is a type of insurance plan that typically has lower premiums than a traditional plan, but has a much higher deductible.
The current maximum contributions for 2008 are $2,900 for individuals and $5,800 for families and this is done on a pre-tax basis. Money deposited in the account grows tax free and is not taxed when used for an eligible expense either. Health Savings Accounts differ from flexible spending accounts (FSAs) in that money in the account can accumulate over the years and is not required to be spent or lost each year. Health Savings Accounts offer a triple tax advantage and are also portable and not tied to a specific employer as with an FSA.
In terms of using an HSA as a source of retirement income, people 55 years of age and older are eligible to make catch-up contributions to their account. For 2008, an extra $900 is permitted, then $1,000 in 2009 and so on. Once the person hits 65, distributions from the account for non-medical related items are taxed as normal income would be. However, unlike an IRA, there are no mandatory age-related distributions from an HSA, so money can be allowed to grow indefinitely.
Learn more about Health Savings Accounts and how you can use the to supplement your retirement savings at: http://www.health--savings--accounts.com
Posted by Wiley Long at June 6, 2008 03:25 PM
Comments
The extra catch-up provision freezes at $1000 in the year 2009. It does not go up. Therefore you must delete 'and so on'.
Posted by: Boo Boo Bear at June 8, 2008 02:31 PM