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Have you considered an HSA?

Is your family currently maximizing all of your opportunities for tax-advantaged savings? Your family should make it an annual routine to review and discuss this, to be sure you are keeping as much of your own money as possible. Depending on your circumstances, you may be eligible for a Health Savings Account (HSA). According to the annual Fidelity Investments Retiree Health Care Cost estimate, a healthy couple retiring at age 65 in 2021 may expect to spend $300,000 on health and medical care expenses in the later years of life. An HSA is a vehicle to save for these expenses in a tax-efficient way.

HSAs were approved by Congress in 2003 so that individuals with high-deductible health plans could receive tax-preferred treatment for saving money for future healthcare expenses. If the funds are used for qualified medical expenses, there is no tax liability. The money goes in pre-tax, continues to grow tax-deferred, and comes out tax-free.

To be eligible for an HSA, you must be covered by a high-deductible health insurance plan and not be enrolled in Medicare or any other non-high-deductible health coverage. The contribution limit is adjusted annually and based on your tax-filing status and age. Besides going in pre-tax, growing tax-deferred, and being distributed tax-free when used for qualifying medical expenses, HSA funds can be rolled over from one calendar year to the next. This gives your family the option to cash flow current health care expenses and allow these contributions to grow over time. Once your account reaches a certain dollar threshold, determined by the HSA custodian, you may then begin investing the funds. You may continue to accumulate growth and interest on the funds that remain in the HSA.

While plans may vary, contributing to an HSA has the potential for more beneficial tax treatment than any other type of account. Medical expenses are a certainty, so why not fund one of the best vehicles for handling them in the future. Medicare premiums, dental and vision expenses, and drug costs are all eligible. In many cases, long-term care and/or long-term care insurance premiums also may be paid out of this. COBRA or health insurance needs between retirement and eligibility for Medicare may also be covered. HSAs offer just another way to defer and avoid taxes for families along the way and save a few dollars while compounding a few others.

If you would like to further explore this as part of your broader financial planning, please let me know and our team would love to assist you.

Stifel does not provide legal or tax advice. You should consult with your legal and tax advisor regarding your particular situation

Please contact us at (317) 571-4600 to see how we can help.

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