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Health Savings Accounts (HSAs) were introduced in 2003 as tax-exempt trust or custodial accounts to pay or reimburse many medical expenses as they occur.
HEALTH SAVINGS ACCOUNT • TAXES • RETIREMENT
Unlike a flexible spending account (FSA), the funds in an HSA roll over to the following years when not spent. These are likely the best and least known place to stash away capital for retirement and get rewarded with tax deductions both in the contributions and then the tax free withdrawals at retirement.
As noted above there are incredible benefits to utilize HSAs.
While we are hopeful that inflationary pressures are easing as demand wanes, supply chains are restored, and employees become easier to hire, it may be time to evaluate your portfolio to make sure it is properly protected if inflation lasts longer than expected.
Below we have aggregated a list of investment opportunities that both provide diversification to traditional stock and bond portfolios while also possibly protecting investors capital during inflationary periods
*Must have a qualifying high-deductible health plan to make contributions. Funds in the HSA may be withdrawn tax free for qualified medical expenses unless a credit or deduction for medical expenses is claimed. After age 65 funds also may be withdrawn at ordinary income tax rates without penalty for any reason. Some health insurance premiums may be qualified expenses such as COBRA coverage, coverage while receiving state or Federal unemployment compensation, Medicare Part B and D premiums and qualified long-term care insurance premiums up to certain limits, but excludes Medigap / Medicare supplement policies and most long-term care policies that include annuity income or life insurance. See IRS Publications 969 and 502. This is not intended to be individual tax advice; consult your tax advisor.
The above example is for illustrative purposes only and not indicative of any investment. Does not include account fees. Present value of illustrated HSA after 15 years is $146,885. Estimated savings from tax deductions at a 37% marginal rate are $45,430. Assumes cash or income used for health care expenses is not withdrawn from an account with a tax liability. The example assumes the HSA is fully invested; if $2,000 was held in a cash account, the illustrated cumulative HSA account value would be $197,687 is projected to be enough to fund about 13 years of projected average qualified Medicare-related health care expenses for a couple.
2023 Contribution Limits
Flexible Spending Account (FSA)
Distributions from an HSA
Most medical and dental expenses are qualified under an HSA plan. Additionally, prescription medication and over-the-counter medications for which you have a prescription are also covered. Under the CARES act, certain medications such as pain relievers and allergy medications are covered.
Qualified expenses could be incurred by you, your spouse, and all dependents you claim on your tax return.
Other Items to Consider
If any portion of a distribution is used for non-qualified medical expenses, that portion is subject to income tax PLUS 20% Penalty!! There is no penalty if the distribution was taken after reaching age 65 or after becoming disabled.
If the HSA holder dies:
Additional insurance for the following items is okay even with an HSA:
Maximizing Your HSA
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