Health Savings Account (HSA): What Happens to it When I Retire?
The Health Savings Account (HSA) is a great tool that is going to help
us all reduce our health insurance costs and avert the current
healthcare crisis in America. But what happens when a person
retires? What use is an HSA then?
Your HSA transforms itself at that moment you turn 65, when you
officially become eligible for Medicare. Your Health Savings Account,
which will have served you all those years as a nice financial cushion
before you begin using your insurance policy, flips into
something very similar to an Individual Retirement Account (IRA).
That's right. An HSA essentially becomes an IRA when you turn
65. The reason for that is that when you turn 65, you are
eligible for Medicare, and HSAs are not meant to help you with
Medicare, that is its own system.
So what happens to that money left over in your HSA? If you
haven't been sick much, there could be hundreds of thousands of dollars
in there!
Don't worry, it's safe. There is no "use it or lose it" policy
with HSAs. That is one of the great things about the HSA.
No, your dutiful HSA has now become a retirement account. Now
that you're 65, you can begin to pull money out of your HSA without
penalty and use it for anything. Use the money
for roller blades, dinner, a new computer, a car, or give it to your
kids. It's yours to do with what you want. No penalties for
withdrawing money.
However, remember, when you take money out of any IRA, that money is
taxed by the IRS. You got a tax-deferral when you put the money
in, and now you pay taxes to take the money out. Fair, isn't it?
If you want to avoid paying taxes on that money, no problem. Just
stick to using the money for healthcare expenses (as approved in IRS
Publication 502) and you won't pay taxes on the withdrawals, even after
you're 65.
This is just one of the many ways HSAs are so useful and helpful for
Americans savings for their own healthcare. The HSA is available today
from many insurance agents and financial planners. Daryl Kulak is the author of the book Health Insurance Off
the Grid. This easy-to-read book provides a simple,
detailed plan to reduce health insurance expenses by thousands of
dollars for people who are self-employed, unemployed or
underinsured. The book is available at the Website: http://www.healthoffthegrid.com
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