Health Savings
Health care spending in retirement can be significant and may account for a large share of your retirement budget. Medicare and retiree health coverage through FMP may pay for some health care in retirement but they won’t cover all costs. Consider how a Health Savings Account (HSA) and long-term care insurance can help cover the cost of care.
The HSA Triple Tax Advantage
An HSA is a tax-exempt account that you can use to pay for qualified health care expenses now and in retirement. The money in your account rolls over from year-to-year and is eligible for investment, making it an excellent savings vehicle for the future. HSAs have a triple tax advantage:
Money you contribute goes in tax-free.
Money you contribute goes in tax-free.
Earnings on your contributions are not taxed while they remain in the account.
Withdrawals are not taxed if they’re used for qualified medical expenses.
Eligibility
To contribute to an HSA:
- You must be enrolled in an FMP medical plan option with an HSA.
- You cannot be enrolled in Medicare, Tricare or any other non-high-deductible health plan, including through your spouse or domestic partner.
- You cannot be participating in flexible spending accounts, including through your spouse’s employer.
- You cannot be claimed as a dependent on another person’s tax return.
Contributions and Accessing Your Account
Remember, starting to contribute early will help you save more over time. There is an IRS limit on the amount you can contribute each year, which is adjusted annually. You can stop, start or change your contributions by contacting the Benefits Service Center.
Note: If you plan to work past age 65, reach out to the FMP benefits team by sending them an email at [email protected] for information about contributing to your account, and review the Navigating Your Retirement document from HSA Bank.
The Money Is Yours to Keep
Your HSA is yours to keep even if you later decide to enroll in a medical plan without an HSA, leave FMP or retire. You can continue to use your funds to pay for eligible health care expenses tax-free now or in the future, even if you’re no longer eligible to make contributions because you’re not enrolled in an HDHP or because you’re enrolled in Medicare.
Using Your HSA at Different Stages
You can take penalty‑free withdrawals for any reason after you’re 65; withdrawals for qualified medical expenses will be both penalty‑free and tax‑free at any age. Use your HSA:
- Anytime: For qualified health care expenses (see IRS Publication 502 for a list).
- Before age 65: To help bridge the gap to Medicare. If you retire before you’re 65, you may need health care coverage to help you bridge the gap to Medicare eligibility at 65. Generally, HSAs cannot be used to pay private health insurance premiums, but you can use them to pay premiums for health care coverage that you’re continuing under COBRA or FMP’s retiree health coverage.
- At age 65: To pay qualified health care expenses and premiums for Medicare coverage apart from Medicare Supplement (Medigap) policies. You can also use the account to pay for any expense, even if it’s not a qualified health care expense, but you won’t get to take full advantage of the tax savings, as you will be required to pay state and federal taxes on those distributions.
For more information on HSAs, or to visit your account, visit hsabank.com. You can figure out how much to contribute to your HSA using the HSA Bank Calculator.
Source: Fidelity
Did you know?
You can pay for more than just doctor bills with HSA money. Use the money for things like family planning, heath care-related travel and more. Review IRS Publication 502 for a full list.
Paying for Health Care Quiz
Know your way forward. As you plan for retirement, you need to know your health care coverage options and how you can start saving now to meet this important retirement need. Test your knowledge with this quick, confidential quiz.