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Monday, April 15, 2024

HSA Planning After 55: What Your Purchasers Would possibly Not Know

What You Must Know

  • Purchasers 55 and older could make annual catch-up contributions to HSAs.
  • After 65, they’ll make withdrawals for non-medical functions with out penalty, topic to revenue tax.
  • It is vital to know how HSAs work together (or, quite, do not) with Medicare to keep away from costly errors.

To say that staff who’re approaching retirement have lots on their minds is a dramatic understatement.

Within the years instantly earlier than retirement, staff who’re planning well needs to be fascinated about their monetary safety greater than ever. Their issues, nevertheless, are probably totally different from staff who’re a long time away from leaving the workforce. Well being financial savings accounts are one sort of planning car that’s typically ignored in the course of the pre-retirement planning course of. 

Whereas most staff are acquainted with the triple-tax advantages of the HSA choice, the problems which are particular to older staff are sometimes ignored. A full understanding can assist pre-retirees really feel extra assured as retirement nears — and may also assist them keep away from costly errors when it comes time to enroll in Medicare.

Catching Up With HSAs

Purchasers in all probability know that they’re entitled to make greater contributions to their retirement accounts as soon as they attain age 50. They won’t know that they’ll make an extra $1,000-per-year contribution to their HSAs as soon as they hit age 55. That is above and past the $4,150 or $8,300 annual contribution limits that apply in 2024.

After all, purchasers also needs to be reminded that there’s no have to spend down their HSA balances annually and that there’s no want to empty their HSA earlier than they retire or enroll in Medicare. 

HSA balances accumulate yr after yr, and so long as the house owners have certified medical bills, they’ll withdraw the funds tax-free in a future yr. Medicare premiums depend as medical bills for functions of the tax-free profit. 

As soon as they attain age 65, they’ll withdraw HSA funds for non-medical bills with out penalty. Any quantities withdrawn for non-medical causes, nevertheless, are topic to odd revenue taxes. 

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