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msg #124625
- Ignore four
modified |
8/7/2015 5:14:47 PM
http://www.investopedia.com/articles/professionals/080715/forget-401ks-put-your-next-savings-dollar-here.asp?partner=YahooSA
http://www.investopedia.com/articles/pf/07/health_savings_accounts.asp
http://www.bankrate.com/finance/insurance/health-savings-account-rules-and-regulations.aspx
HSA pros
Money goes in pretax or contributions are tax-deductible.
Once in the account, money grows tax-free.
Money can be withdrawn tax-free to cover qualified medical expenses.
HSAs are also a bit hamstrung by low contribution levels. The contribution limit in 2015 is $3,350 for an individual and $6,650 for family coverage. People over age 55 can put in an extra $1,000 per year in catch-up contributions.
HSA cons
The money is earmarked strictly for medical expenses or penalties may be imposed. Withdrawals used for nonqualified medical expenses before someone becomes eligible for Medicare are subject to both income taxes and a 20 percent penalty.
After age 65 or Medicare eligibility, withdrawals for nonmedical expenses are not subject to the 20 percent penalty, though they are subject to income taxes, just as they would be from a traditional IRA.
Contributions to the account can only be made up until an individual hits Medicare eligibility. Turning 65 doesn't automatically disqualify you from contributing to an HSA, but enrolling in Medicare as the primary source of insurance does.
HSA hacks: Tips and tricks
Everyone loves a good loophole, and there are a couple around the HSA. For instance, HSA distributions don't have to be taken in the year the expense is incurred. That means that money tucked safely inside an HSA can keep growing tax-free -- provided, of course, that you can cover the deductible on your health insurance plan and any out-of-pocket expenses when they are incurred.
"Keep a list of your qualified health care expenditures and receipts. Then, when you need money to pay for your kid's college, take the vacation you always wanted -- even before age 65 -- you can pull it out of the account and report an equal amount of health care expenditures from prior years on your tax Form 8889 for that year," says Matt Rinkey, president of Illumination Wealth Management in San Diego.
Only one hitch: HSA distributions won't cover health care expenses incurred before you establish an account.
Another trick is only useful for savers between the ages of 59 1/2 and 65 who own traditional IRA or 401(k) assets.
By taking withdrawals from an IRA or 401(k) and putting that money directly into an HSA, people can nearly wash out the taxation on those dollars, according to Grosso.
"It's a little clumsy. You take the money out, pay tax and then put the money in the HSA and take a deduction. It's not a complete wash, but it's another way to build up assets in the HSA," he says.
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