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March 04, 2012
Health Savings Accounts When You Turn 65
Enrollment in Health Savings Accounts paired with a high-deductible plan has been on the rise as more consumers are discovering how it can lower their health care costs. However, what if you turn 65 and become eligible for Medicare. What will happen to your Health Savings Account (HSA)?
Once you turn 65, you are free to use your HSA funds for any other purpose aside from health care. Since you are not allowed to make contributions when you turn 65, it is advisable that you build your HSA balance so you can use the money when you retire.
To help secure your retirement, as much as possible, deposit the full allowable maximum contribution to your HSA. This is because the funds you place in your account grow with tax-free earnings. Aside from that, you get to save on taxes because contributions are deducted from your annual income tax.
As of this year, the maximum contribution that an individual can deposit is $3,100. As for families, the limit is $6,250. Imagine slashing off the taxes you pay by a couple thousand dollars just because you funded your Health savings account.
There are also benefits once you turn 55. You are allowed to make an extra “catch up” HSA contribution of $1,000 per year. That means an individual can contribute almost $10,000 more than they would normally between the ages of 55 to 65.
Once you turn 65, you can use the funds for Medicare premiums, deductibles and any out-of-pocket expenses. Withdrawals are also tax free but it will be taxable as income. You’re not allowed, though, to use HSA money to buy a Medicare Supplement Insurance plan.
Posted by Wiley Long at March 4, 2012 12:11 PM