Saving for Retirement? How about Saving for Healthcare at Retirement….
When saving for retirement we often focus on our 401k, brokerage account, and life insurance. However, keep in mind that an HSA account is a great way to set funds aside for our retirement years.
The federal government designed HSAs to make it easier to afford health insurance. Those who are eligible can reduce health insurance premiums and save tax dollars, too. Former President Bush realized that our aging Americans would be faced with enormous health premiums and bills during retirement years. HSAs were created as a vehicle to save funds to be used for Medicare premiums, the fees and services associated with rising healthcare as well as Long Term Care premiums. These plans are now offered by 57 percent of employers as a plan option. That number will increase to 62% in 2013 and 71 percent through 2018 according to a 2012 survey by the Midwest Business Group on Health and the Benfield Group. Part of the increase interest in HSA will be the Healthcare mandate and the affordability of these plans.
To qualify for an HSA account, you must participate in a High Deductible Insurance Plan, not be listed as a dependent under someone else’s tax return, and are not enrolled in Medicare. These plans allow you to control your cost and pay lower premiums. Along with the lower premiums you are allowed to set aside funds in an HSA bank account. These funds are used to pay for all medical services covered by your insurance policy and even some that are not under your policy (such as dental, vision, and OTC as long as you have an prescription for them - http://www.irs.gov/publications/p969/ar01.html#en_US_2011_publink1000259135 ). Funds that are not used in the plan year are carried over each year.
How does it work? Your funds are deducted from your paycheck on a pre-tax basis and sent directly to your account. If you are on an individual plan, they are tax deductible (just be sure to let your tax preparer know you are participating in an HSA plan). Funds spent on medically eligible services (see link above or refer to the irs.gov website for a list) are paid with tax free funds and your account grows tax free.
An HSA account is like an IRA on steroids. With a traditional IRA or 401k, if you are eligible, you take a deduction when you put money in. The money grows tax-deferred, and then you pay taxes when you withdraw it. With an HSA, you take the same deduction when you contribute money, but when you use the money in your HSA for medical expenses and qualified health insurance premiums, it comes out tax-free. Where else do you get to contribute tax-deductible dollars and withdraw them tax-free?
This year’s maximum HSA amount for an individual is $3,100. If you have dependents the maximum is $6,250
The cost of healthcare at retirement is predicted to be one of the major expenses, if not a major expensive item, during your retirement (read interesting article in the link below ).
It’s time to think about healthy decisions now for your future!