May 2018 Newsletter

4 HSA Facts Every Planner Should Know

In previous newsletters I have covered the basic financial planning concepts surrounding Health Savings Accounts (HSAs). Most notable is the strategy of not using the HSA for current health care expenses and instead, investing the HSA for retirement. Click the video link at the bottom of the page for a review of this strategy.

Moving beyond “HSA 101” concepts, consider of few other useful planning strategies with HSAs:

1. The HSA owner has control over the money in their HSA account.

This may seem somewhat basic but consider the implication. If you do not like the saving and investment options in the HSA your employer has chosen, you can transfer the funds as soon and as frequently as you desire. Be sure to ask about possible transfer fees to make prudent decisions on the frequency of transfers. It is also important to realize that an employer can change their HSA custodian and offer multiple HSA custodians to employees. By utilizing a second slot on their payroll service, they can offer a choice to employees, possibly adding one with a lower cost mutual fund share class or broader investment options.

2. The HSA is a real asset.

Once again, a seemingly simple point but one that creates interesting financial planning opportunities. If one names their spouse as the HSA beneficiary, upon death of the owner, this spouse can continue to use the account as an HSA. Upon the death of the second spouse, the beneficiary has 12 months to make tax-free withdrawals for qualified medical expenses that the owners had not yet utilized. Remember, past qualified medical expenditures not withdrawn from the HSA can be utilized to make tax-free withdrawals.

3. Financial Advisors can offer HSAs to their clients and be compensated.

Clients need help understanding the significance of retirement health care costs and how the HSA can be better utilized as one component of their retirement accumulation plan. Too many individuals continue to use the HSA for current health care expenditures and remain ignorant of their HSA choices. Email me to discuss HSA solutions for your broker dealer or RIA.

4. If you are able to defer Social Security and Medicare enrollment, you can continue to fund your HSA.

May individuals continue to work beyond age 65 and have company provided health insurance from an employer with 20+ employees. They often will have the option of deferring Social Security Retirement Benefits and Medicare enrollment. This allows one to continue funding the HSA during those peak, critical earning years prior to retirement. I will provide more detail on this concept in a future newsletter.


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The information in this presentation is provided as a general overview. It is derived from the Internal Revenue Code, and other government publications, all subject matter sources reasonably believed to be reliable.  Tax law and the laws governing Medicare/Medicaid are complex and subject to change.  Clients should consult with their attorney and/or qualified tax advisor when making decisions regarding these matters.