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Use an HSA to Offset Medicare Expenses in Retirement

If you are age 60 or so and gearing up for an expected retirement in a few years, you might feel concerned about the high cost of healthcare. You’re wise to consider this aspect of retirement planning, because it is true that Medicare won’t cover everything you need in retirement. You will still owe premiums and copayments, along with annual deductibles and even coinsurance charges for hospital stays. So how can you prepare for these expenses, which can be considerably large, knowing that the cost of health insurance continues to rise? 

One option, that is growing in popularity, is to use a health savings account (HSA) to set aside more money for retirement. 

As you know, you’re limited to an annual contribution to your qualified retirement plan, and you might be worried whether the distributions will be enough to cover your expenses. On top of that, you might have gotten a late start to retirement planning, as many people do. But a health savings account can actually serve as an extra retirement planning vehicle, if you know how to utilize it properly. 

Funds are contributed to an HSA on a pre-tax basis, meaning they can earn you a valuable tax benefit each year. But if you don’t use the money in your HSA to cover qualified healthcare expenses during any given year, the money rolls over to the next year. And you can even take the account with you into retirement, and then use the funds for expenses like Medicare premiums, deductibles, and copayments. You can also take withdrawals to cover the cost of prescription medication or special equipment needed for a medical condition. 

In 2022, individuals could contribute up to $3,650 to an HSA, and those with family healthcare coverage could save up to $7,300. These limits are sometimes adjusted upward in response to rising costs and changes to healthcare plans. But as you can see, it would be possible to save a significant amount of money toward future healthcare expenses! 

Give us a call to discuss the benefits of a health savings account, and we’ll help you decide if this type of account is right for you now and in the future. 

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