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Health Savings Accounts
Last Updated: March 22, 2013
Part of any comprehensive retirement plan should be an evaluation of potential risks to your retirement success. One of the largest risks is the ever increasing cost of healthcare. Additionally, it is impossible to predict your personal future health and thus your healthcare usage. For this reason, it is important to share this risk with an insurance provider. For healthy individuals, a high deductable health plan coupled with a health savings account will frequently be the most cost effective way to protect against this risk to your retirement savings.
Health savings accounts (HSAs) are part of the move toward a more consumer-driven health care structure. The idea is that making the consumer more connected to the payment for service will drive them to seek less costly treatment options, thus resulting in lower cost. An HSA is a savings vehicle that can be paired with a high deductible health plan to cover routine medical expenses.
Eligibility
To open or contribute to an HSA you must meet certain eligibility requirements. Specifically:
- You must be covered by a qualified high deductible health plan (HDHP) on the first day of the month
- Single Coverage Minimum annual deductible / Maximum annual out-of-pocket: $1,250 / $6,250
- Family Coverage Minimum annual deductible / Maximum annual out-of-pocket: $2,500 / $12,500
- You cannot be covered by any other health plan that is not a qualified high deductible health plan, including a spouse’s health insurance
- You cannot be covered by a spouse’s Medical FSA
- You cannot be enrolled in Medicare Part A or Part B
- You cannot be covered by TriCare
- To make contributions you cannot have accessed your VA medical benefits in the past 90 days
- You may not be claimed as dependent on another person’s tax return
- Single Coverage: $3,250
- Family Coverage (2 or more people on your policy): $6,450
- Catch up Contribution: If you are age 55 or older at any time during the tax year, you may contribute an additional $1,000 to the numbers above.
- Tax Deductible Contributions – Reduce your income today by the amount of any contributions
- No dividend, interest or capital gain tax – Interest and other earnings on Health Savings Accounts are tax-free
- Withdrawals for qualified medical expenses are tax-free
- Full Portability – If you change insurance companies you can keep your current HSA or move your HSA to another provider at any time.
- Continue to use your HSA dollars tax-free, even if you are no longer covered by a high deductible health insurance plan.
- No Year-End “use it-or lose it” – Health Savings Accounts continue to grow year to year.
- May include investment options for increased growth potential
