Ask the Experts

Ask the Experts

Health Savings Accounts

Can a financial advisor manage a client’s HSA assets?
Yes. There are HSA custodians that provide services with a broad range of investment choices. This allows an advisor to build a personalized HSA portfolio, advise on the account, and be compensated. For more information send me an email to discuss:

Who can open a Health Savings Account?
Health Savings Accounts are only available with certain “high deductible” health insurance plans. In addition to having a 2020 deductible set at $1,400 for individual coverage or $2,800 for family coverage, the plan also must carry limits on the maximum out-of-pocket expenditures for families or individuals. They also have rules regarding what services can be provided prior to meeting the deductible. The best way to be sure that your health insurance makes you eligible for an HSA is to ask your insurance provider or employee benefits coordinator.

Why should I save receipts from health expenditures?
Qualified medical expenses can be paid for with a tax-free withdrawal from your HSA so it’s good to have receipts to verify the expenditure. If you pay for qualified health expenses with non-HSA money (in a year when you had HSA insurance) you can make a tax-free withdrawal from your HSA at any point in the future.

If I invest my HSA for retirement, can I make a tax-free distribution for Medicare premiums?
Medicare A, B, C (Medicare Advantage Plans), and D are qualified medical expenditures. If you have your Medicare deducted from Social Security Benefit, you simply withdraw an amount equivalent to your premiums from your HSA. Medicare Supplement Premiums (Medigap) cannot be paid for with tax-free HSA distributions.

Can I mirror my 401(k) allocation with my HSA allocation?
Generally speaking, YES! HSA custodians who support financial advisors will often have most of the mutual funds and even the appropriate share class you are using in your 401(k). If you are an advisor who manages defined contribution plans, you can set up, manage and be compensated on the client HSA allocations.

Can I invest the money in my HSA and give it the opportunity to grow for future use?
Yes. Many HSA custodians offer a variety of investment choices ranging from mutual funds to full service brokerage accounts. Unused funds in an HSA grow tax-deferred. If you are not satisfied with the investment choices in your current HSA you can transfer your balance at any point to a new custodian. You may need to pay a transfer fee and employer sponsored plans will usually require ongoing payroll deducted contributions to continue into the custodian linked to your health insurance policy.

Can a married couple under the same group HSA insurance plan, where each spouse in age 55 or older, each make the $1,000 catch up contribution?
If you open a separate HSA account for each spouse, then yes, each spouse (age 55+) can utilize the $1,000 catch up provision.

Medicare Facts

Since Medicare bases my Part B and D premiums on modified adjusted gross income, how will they know my income?
Medicare will look at the income reported on your tax return from two years’ prior (2020 Medicare premium is based on your 2018 modified adjusted gross income).

Since my Medicare premiums are deducted from my Social Security Benefit, can a large increase in Medicare costs eliminate my Social Security COLA? Could it even cause a reduction in my Social Security Retirement Benefit?
The answer depends on your income (more specifically your modified adjusted gross income).
Medicare places you in one of six income brackets to determine the amount of your Part B and Part D premium.
If you are in the first (lowest) bracket, an increase in Medicare B Premiums can eliminate part or all of a Social Security Retirement Benefit COLA but cannot decrease your Benefit. An increase in Medicare Part D premium could eliminate your COLA or decrease your Benefit (primarily in years with minimal or no COLA).

If my retirement results in a drop in my income, will Medicare consider looking at current income rather than income from two years ago?
Yes, you can file form SSA-44 and ask for this re-consideration. A few of the legitimate reasons for a reduction in income that are listed on the form include retirement, death of a spouse, divorce, or loss of a pension.