An HSA, or health savings account, is an account that can be established to help individuals combat the ever increasing cost of health care. The money inside the health savings account will grow tax deferred. Furthermore, as long as the money that is withdrawal is for qualifying medical expenses, there are no taxes or penalties that have to be paid.
In order to take advantage of a health savings account, you must be covered by an HDHP, or high deductible health plan. Because these types of plans are typically lower in cost, but higher in deductibles the idea is to put some or all of the savings into a health savings account in case you need it. If the money is not used it simply continues to roll over and can then be viewed as savings for when you retire.
Not a Regular Savings Account
Unlike your money into a traditional savings account, the money in a health savings account can be invested as you see fit. You are the one in control of the money your health savings account contains and you are in control of what you invest that money in. So, your health savings account’s growth relies heavily on you.
Age 65 – Now What?
One of the most common questions that are asked in regards to health savings accounts is what happened to that account once a participant reaches age 65. When this happens, the health savings account acts sort of like an IRA. There will no longer be a penalty for those wishing to withdrawal some or all of the money, even if the withdrawal is not for a qualifying medical expense. However, you will have to pay income taxes on that money at that time.
You can continue to use the health savings account after age 65 for tax free out of pocket medical expenses or to pay your share of any retiree medical insurance premiums you may have. However, you can’t use that money to buy Medicare supplemental insurance.
Make the Most of the Money
No matter how you decide to treat your health savings account after age 65, it makes sense to make the most of the money that is left. If you can leave the money where it is then you might be better off doing so. You might also wish to speak with a retirement specialist who can help you figure out if your money should be kept in your health savings account or if there is another such investment account that your money might be better off residing in.
Learn more about how health savings accounts can benefit you.