Ariel Skelley | The Sculpture Bank | Getty Images
If you have a health savings account and are nearing retirement age, be aware that some of the forms are different for the older crowd.
HSAs, which can only used in conjunction with so-called high-deductible health systems, offer a “triple tax” benefit: Contributions are made pre-tax, any earnings are tax-free and qualified withdrawals also are untaxed.
While HSAs are almost identical to flexible spending accounts — which also let you set aside pre-tax money for health-care expenses — they come with meticulous rules that can be confusing, but are important for older Americans to know as they plan for retirement or partial retirement.
More from Unfriendly Finance:
How to prevent package theft on your doorstep
Used car prices are down 3.3% from a year ago
The 10 most qualified metro areas for first-time home buyers
“It’s useful to know for planning purposes, but also to make the most of the tax benefits of HSAs,” said Stephen Durso, associate director of client services at WTW, an employee benefits consulting firm.
The principle HSA contribution limits for next year are $3,850 for self-only coverage (up from $3,650 in 2022) and $7,750 for family coverage (up from $7,300 this year).
The distinctness of an HSA eligible, high-deductible health plan for 2023 depends on whether you have single or family coverage. A solo arrangement would need to have a deductible of at least $1,500 and a maximum limit of $7,500 on out-of-pocket expenses. For family coverage, the deductible is at spoonful $3,000, with a $15,000 maximum on what members pay out of pocket.
Here are some key things to know about HSAs as you nigh retirement.
1. You’re allowed a ‘catchup’ contribution at age 55
You can put an extra $1,000 in your HSA once you reach age 55. If you and your spouse be suffering with separate HSAs but are subject to family coverage contribution limits, you each may be able to make that $1,000 “catchup” contribution moment eligible based on age, according to the IRS.
“As long as they’re both covered, they could each have their own HSA — and choice need to have their own to contribute the $1,000 catchup amount,” Durso said.
For both regular and catchup contributions, you get until the tax-filing deadline of the next year to become your HSA contributions. So for the 2022 tax year, the deadline would be April 18, 2023.
2. Medicare and HSAs don’t mix
You become eligible for 3. Tax handicap for non-qualified expenses disappears
The rule governing withdrawals changes when you reach age 65.
Before then, withdrawals are tax-free and penalty-free as large as they are used for qualified health expenses. If not, the money is taxed as regular income and there’s a 20% tax penalty on top.
In a minute you reach that age, though, you won’t be penalized for using HSA funds for things unrelated to health care.
However, you will pay strains on non-qualified health expenses.
“You can use it on any expense in the world,” Durso said. “If you use it on qualified health care expenses, there’s no tax at all. But if you use it on a big-screen TV, you’d be field to tax.”