Older individuals underestimate the substantial healthcare expenses that accompany old age. This cause haywire in retirement planning. According to Fidelity, a couple who retires in 2017 would require a minimum of $275,000 if they want to satisfy their medical requirements. This amount does not include care for longer periods of time.
The HSA money could be utilized anytime for duly qualified medical costs. These include childbirth and other particular out-of-pocket expenses. It is to be noted that contributions to HSA are not permitted after the individual reaches 65 years of age. This is also not permissible when the person concerned gets qualified for Medicare. However, money can be taken out without any fear of penalty post that age. It is to be remembered that such withdrawals are subject to tax if the money is not used for any qualifying medical expenses.
Maximum contribution limits are capped at $3,400 and $6,750 for qualified individuals and families respectively. Income limits are not applied. This means HSAs can be used by high-income earners as well. When the account gets $1,000, the scheme permits the individual concerned to invest the remaining quantum of money. Experts suggest that a person should save and invest early to maximize the HSA benefits during retirement.
Taxes are not imposed on the HSA-qualified withdrawals and contributions. Interest earned is also not subject to taxation. The HSA funds, unlike its flexible spending compatriots, does not expire. It moves with the individual when jobs are changed.
One sure way to tackle such future financial needs is to open health savings accounts or HSAs. There is, however, an eligibility filter for this scheme. The person making this application should have high deductible insurance plan. The health plan in such cases must have a minimum deductible of about $1,300 and $2,600 for individuals and families respectively. Such plans tend to come with lower premiums. The individual, however, may pay more amount of money from own pocket compared to other insurance plans. According to Lori DeFoor, a financial adviser, anyone who considers the HSA should comprehend the consequences of going for a high deductible plan. They must also have a good plan for covering the deductible as the value in the HSA goes up.