Using Your Self-Directed HSA During Retirement

Published on April 10, 2018

There’s Value to Funding Your Health Saving Account Today, to be Used in Retirement

According to a new joint study by the LIMRA Secure Retirement Institute and the Insured Retirement Institute (IRI), only 25 percent of Americans with a health savings account (HSA) plan to use the assets in their accounts for health care costs they incur in retirement. The survey revealed that many people don’t realize they can use the accumulated assets in a health savings account to pay for medical bills and long-term care expenses when they’ve retired.

• Forty percent erroneously believe that balances must be spent down every year or be forfeited. However, just as with an IRA or other retirement plan, HSAs can be funded up to the maximum allowed contribution year after year, and continue to accumulate worth and wealth for the individual.
• About three-quarters of respondents who are still working and participate in an HSA said they use the money to pay for current medical expenses; surprisingly, only 26 percent said they plan to use the money for future health care expenses—which they can.

While one is still working, the funds must be used strictly for qualified medical expenses. In retirement, the money can be used for other purposes as well. That said, with the rising costs of health care in the U.S., investors who participate in a health savings account are smart to fund theirs for future medical and long-term care costs if they can afford to do so.

Contributions to a health savings account are tax deductible, the assets grow tax free, and withdrawals are tax free and penalty free when used for qualified medical expenses up to age 65. After age 65, the funds may be withdrawn for other purposes without penalty but those withdrawals will be taxable. Note that once you are on Medicare, you are no longer eligible to contribute to your HSA but you may continue to withdraw the funds.

Self-directed HSAs

Did you know that self-direction is not restricted to IRAs? You can also self-direct your health savings account, which can help you build up a bigger nest egg for medical expenses—in the near or more distant future. You can even use the assets to pay your Medicare premiums once you reach age 65.

By including alternative assets in a self-directed HSA today, you can take advantage of the different markets you know and understand, and grow the savings you are likely to need for health care when you retire. With the estimated cost of health care now in the hundreds of thousands per individual retiree, the more you can do to boost those savings now, the better off you and your wallet will be later. You can read more about self-directing your HSA here.

If you’d like to open a self-directed HSA, contact Next Generation Services at Info@NextGenerationTrust.com or 888-857-8058 and we’ll help you get started.