Maximizing your health savings account is vital as you near retirement.
Are you nearing age 65?
If so, your contributions to your health savings account (HSA) will become more limited.
At the same time, health care in retirement will become a significant potential expense.
On average your health expenses in retirement will be about $270,000 for a couple over the course of your retirement.
How do you prepare for this?
According to a recent healthsavings.com article titled “Approaching Retirement? Five Tips to Maximize Your Investment HSA,” there are steps you can take now to reach your goals in retirement.
For starters, your health savings account is a great tool.
It can be used to pay for long-term care insurance premiums, long-term care Medicare parts B and D, vision expenses, medical expenses, and dental expenses.
As you can see it is quite versatile.
How do you make the most of this benefit?
By age 55, you and your spouse should each have your own respective health savings accounts.
You can begin making catch-up contributions at this age.
These contributions must be connected to separate and distinct Social Security numbers.
Consequently, with two Social Security numbers you can contribute more money.
You can use either account to pay for eligible expenses for you and your spouse.
If you are enrolled in Medicare and are disqualified from contributing to an HSA, you can still grow your money.
You can move it to an investment-focused HSA.
There may be a transfer fee though.
If your breadwinner and insurance-holder in the family is the older spouse, chances are that spouse will enroll in Medicare as soon as possible.
He or she will also stay enrolled in the employer policy for the family to be covered.
Because the spouse is covered by insurance, this individual can still make contributions to his or her HSA.
The family can make family contributions and a single catch-up contribution of $1,000, if the contributing spouse is 55 years or older.
This contribution cannot be deducted from the income of the ineligible spouse.
You may be sacrificing FICA savings.
If you are employed and covered by employer insurance, you may be able to prolong enrolling in Medicare.
Your employer coverage must be known as credible coverage.
This will not apply to you if you are currently receiving any railroad retirement benefit or Social Security.
In that case, you will be automatically enrolled in Medicare Part A.
In short, this will not apply to you.
If you can postpone Medicare, however, then you will need the timing to be right when you finally switch to Medicare.
What are the takeaways?
Do not wait to contribute to your HSA.
By starting early and planning wisely, this move can make a big difference to your retirement security.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: healthsavings.com (undated) “Approaching Retirement? Five Tips to Maximize Your Investment HSA”