Making Health Savings Accounts work in retirement

Making Health Savings Accounts

work in retirement

Saving in a Health Savings Account now could be part of a smart

retirement strategy

An HSA, or Health Savings Account, is a bank account you use to pay for qualiﬁed medical, pharmacy,

dental and vision expenses. You can save on income taxes with an HSA because the money you put in

and use toward qualiﬁed medical expenses is tax-free or tax-deductible. In short, it provides a triple tax

advantage – contribute tax-free, earn interest and gains tax-free and spend on qualiﬁed medical expenses

tax-free. You can contribute to your HSA any time of the year, up to the annual limit. Individuals who are 55

and over can also make catch-up contributions (an extra $1,000/year) while enrolled in a high deductible

health care plan.

• Unlike an FSA, HSAs aren’t “use it or lose it” so any money you haven’t spent by the time the year ends

or you retire can be used for future medical expenses.

• Like a 401k, you take the money with you wherever you go.

There are two schools of thought for an HSA: using your funds now as you need them or saving them for

later. If you use your funds now for out-of-pocket expenses, you’ll have less saved for retirement. If you pay

for your medical expenses out of pocket now, you’ll have more saved in your HSA account to help pay for

medical expenses once you retire. If you retire before age 65 and you aren’t yet eligible for Medicare, you

can use money in your HSA to pay your medical coverage premiums.

Conﬁdence comes with every card.

HSA Strategies

Cover out-of-pocket medical expenses:

Use like a Health Spending Account

Save for medical expenses in retirement:

Use like a 401k

Contribute money to your HSA while you are

working

Contribute money to your HSA while you are

working

Use the money to pay for out-of-pocket medical

expenses every year

Do not use any savings to pay for out-of-pocket

expenses

Savings goes up and down throughout year as you

contribute and use the money in your account for

medical expenses

Savings goes up each year as you contribute, until

you retire

Once the money in your HSA account has been

spent, you will have to pay for any uncovered

medical expenses out of pocket

Use savings in your HSA to pay for medical

expenses after you retire so you don’t have to

use your 401k, social security or other savings for

medical expenses

BONUS: You don't have to claim expenses in the year they occurred. If you save receipts from medical

expenses you've incurred while working, you can "pay yourself back" from your HSA after you retire.

Let’s take a look at how an HSA can work for you:

If you are young or just starting out in your career, you may not have extra money for out-of-

pocket expenses. Maybe you have young family and see the doctor a lot. In these cases, you

may want to use your HSA like a Health Spending Account and use your funds now.

At mid-career, you might start thinking about retirement and saving. At this point, you could pay

out of pocket for some or all of your medical expenses, and let the money in your HSA grow.

Near the end of your career, you can treat your HSA like a 401k, contributing the maximum

amount until retirement. At 55, you can even start to add catch-up funds.

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Blue Cross Blue Shield of Michigan and Blue Care Network are nonproﬁt corporations and independent licensees of the Blue Cross and Blue Shield Association.

Once you’ve enrolled in Medicare, you’ll no longer be able to contribute to your HSA. However, you

can continue to invest the money already in your HSA and make withdrawals for qualiﬁed health care

expenses tax-free. If you’re 65 or older, you’re not limited to using the money in your HSA just for health

care expenses. Keep in mind that if you use it for other expenses, you’ll need to pay income taxes on

those amounts.

If you don’t have one already, an HSA is a good tool to have in your tool box as you start to prepare

for retirement.

For more information about HSAs, visit bcbsm.com.