What You Must Know
- Shoppers 55 and older could make annual catch-up contributions to HSAs.
- After 65, they’ll make withdrawals for non-medical functions with out penalty, topic to revenue tax.
- It is essential to grasp how HSAs work together (or, moderately, do not) with Medicare to keep away from costly errors.
To say that workers who’re approaching retirement have quite a bit on their minds is a dramatic understatement.
Within the years instantly earlier than retirement, workers who’re planning neatly needs to be fascinated by their monetary safety greater than ever. Their considerations, nonetheless, are doubtless totally different from workers who’re a long time away from leaving the workforce. Well being financial savings accounts are one kind of planning car that’s usually neglected through the pre-retirement planning course of.
Whereas most workers are aware of the triple-tax advantages of the HSA possibility, the problems which can be particular to older workers are sometimes ignored. A full understanding can assist pre-retirees really feel extra assured as retirement nears — and may also assist them keep away from costly errors when it comes time to enroll in Medicare.
Catching Up With HSAs
Shoppers in all probability know that they’re entitled to make increased contributions to their retirement accounts as soon as they attain age 50. They may not know that they’ll make an extra $1,000-per-year contribution to their HSAs as soon as they hit age 55. That is above and past the $4,150 or $8,300 annual contribution limits that apply in 2024.
In fact, shoppers also needs to be reminded that there’s no have to spend down their HSA balances every year and that there’s no want to empty their HSA earlier than they retire or enroll in Medicare.
HSA balances accumulate yr after yr, and so long as the homeowners have certified medical bills, they’ll withdraw the funds tax-free in a future yr. Medicare premiums rely as medical bills for functions of the tax-free profit.
As soon as they attain age 65, they’ll withdraw HSA funds for non-medical bills with out penalty. Any quantities withdrawn for non-medical causes, nonetheless, are topic to atypical revenue taxes.