Health Savings Account (HSA)

Benjamin Haas |

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Introduction:

  • One of the primary concerns for pre-retirees are the anticipated expenses associated with rising healthcare costs. Most research I have found suggests a healthy 65-year old couple can expect to spend around $250,000 over the course of their retirement on health insurance premiums alone. That doesn’t include out-of-pocket expenses or long-term care costs! Hence, setting aside money to pay for these bills is critical to retirement planning. To help fill a gap in saving for health care expenses, we think you should consider making contributions to a tax-advantaged health savings account (HSA).

Where the CFP® sees the fit:

  • Those looking to retire before Medicare eligibility age (65) and needing to find their own insurance plan
  • Pre-retirees looking to find additional tax-savings opportunities with discretionary cash flow
  • Young accumulators looking to reduce insurance premiums via a high deductible health plan

The strategy:

  • As we age, insurance costs go up to counteract the increased likelihood of needing to tap into our insurance benefits. We also know that on top of paying premiums there’s the dreaded deductible that must be met before additional benefits kick in. Enter the HSA, a way to tuck money away, pre-tax (you get the deduction), with growth being tax-deferred and distributions coming out tax-free when used in the future to satisfy qualifying medical expenses. That’s triple tax-advantaged! If you’re in your prime earning years, why not fill this vehicle as best you can so that you can enter retirement with the ability to choose a higher deductible, lower premium plan with this accessible cash set aside?

Additional notes:

  • There is an annual HSA contribution limit of $6,900 in 2018 (married couple covered under qualifying medical plans). If you’re over the age of 55, you can also save an additional $1,000 each year.
  • Use is for “qualified medical expenses,” not insurance premiums. Uses can branch into paid services like any dental, hearing or vision expenses.
  • Your spouse and/or dependents can use your HSA account as well.

Bottom line:

  • While I don’t believe in universal advice (we believe in advice tailored to our clients), it’s fair to say that we hope all our clients have money stashed away in an HSA by the time they retire. You benefit from tax-advantages on money you’re pretty certain to spend in your future anyway.

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Securities offered through LPL Financial, Member FINRA and SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor. U.S. Financial Advisors and Haas Financial Group are separate entities from LPL Financial.

This material contains only general descriptions and general strategies for use of an HSA. This content should not be a substitute for individual financial advice. If you need more information or would like personal advice you may contact our office.