Cover your Health Care Costs in Retirement with Your HSA Funds

Cover your Health Care Costs in Retirement with Your HSA Funds

Jun 18 2020

Funded with pre-tax dollars and not subject to taxes at withdrawal (when used for qualified medical expenses), your Health Savings Account (HSA) is a virtually tax-free way to save money for out-of-pocket health costs.

Did you know that your HSA can be used to cover health expenses in retirement? The money you contribute to an HSA plan rolls over even if you no longer have the associated health plan, so it’s an effective way to save for future costs. If you are currently paying into an HSA and approaching retirement, take a look at a few ways you can make the most of your HSA:

Use your HSA to pay for future out-of-pocket health costs:

After retirement, you can continue to use your HSA to pay for out-of-pocket health costs, tax-free, as long as they are qualified medical expenses. Qualified medical expenses include: doctor visits, vision care, prescriptions and some dental expenses. Fitness club memberships, cosmetic surgery and Medigap premiums do not qualify. Learn more about Qualified and non-qualified medical expenses here. You can use the money in your HSA to reimburse yourself for your out-of-pocket expenses. Read more about using your HSA and reimbursement.

Use your HSA to cover monthly premiums for Medicare:

Once you reach the age of 65, HSA contributions can be used to pay for Medicare Parts A, B or D premiums, without any taxes on withdrawal. The funds can also be used to pay for Medicare Advantage premiums if you decide to increase your Medicare coverage. However, you cannot pay Medigap monthly premiums using your HSA. Unfortunately, once you enroll in a Medicare plan, you can no longer make new contributions to your HSA so make sure you plan ahead. Learn more about HSA contributions and limits.

Use your HSA to cover other health care premiums:

After you turn 65, your HSA can be used to pay for other health care premiums, including any employment-based retiree benefit programs. It’s not just your premium payments though, your HSA can be used to pay for health insurance premiums for your spouse or dependents if they are receiving health care continuation coverage through COBRA or are receiving unemployment through a federal or state program.

Use your HSA to pay for long-term care:

Long-term care, or assistance with the activities of daily living, can be provided in your home, a retirement community or a nursing home. Long-term care expenses can be paid for using your HSA. Better yet, you can use your HSA funds up to a predetermined maximum amount, regardless of your age, to pay for long-term care insurance to protect you against the financial impact of your long-term care expenses.

BONUS: Did you know that you can use your HSA to pay for non-medical expenses in retirement?

Once you reach the age of 65, you can access money in your HSA for non-medical expenses along with qualified medical expenses. At this time, you will face no penalty for withdrawals and will simply be subject to standard income tax.

Learn how to set up an HSA here.

We offer members a digital copy of our HSA Guide. This guide is a quick and easy reference to help you understand the basics of HSA knowledge. Access the guide here.

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