By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS
Q: My company offers a Health Savings Account, should I be contributing?
A: An HSA is a way to help save for medical expenses and reduce your taxable income. The average healthy 65-year-old couple retiring this year can expect to pay $363,946 ($537,334 future value) in lifetime Medicare and supplemental insurance premiums and out-of-pocket costs. Planning for medical expenses, whether now or in retirement is an important part of any financial plan.
ADVANTAGES
Triple tax advantage
I. Pre-Tax contributions (contributions are tax deductible if made outside an employer plan)
II. Interest, dividends and capital gains accumulate tax-free
III. You pay no tax on withdrawals for approved medical expenses
Investment options
You may grow the account using mutual funds, stocks and other investment tools; these have varying degrees of risk, always consult with your financial advisor.
Others can contribute to your HSA
Your employer, a relative, etc.
No limits on carry-overs
If you have money left in your HSA at the end of the year, it rolls over to the next year.
It is convenient
Most HSAs issue a debit card, so you can pay for your medical expenses right away.
Withdrawals
After age 65, withdrawals for nonmedical expenses are subject to income tax only, no penalty.
DISADVANTAGES
A high-deductible health insurance plan
This may be an advantage because the premiums will be lower, however, if you or your family have high medical expenses you will have to satisfy the higher deductible.
Contribution limits
2019 limit is $3,500 per person, for a family, the limit is $7,000 (age 55 and over can contribute an additional $1,000).
Withdrawals
Before age 65, account owners face a 20 percent penalty for withdrawals for nonqualified medical expenses as well as being subject to income tax.
Talk with your trusted advisor to explore if funding an HSA would make financial sense for you.
This is for education only. Before using this information in any way discuss it with a financial professional. There are many risks associated with stock trading. You may lose some or all of your financial investment. Securities offered through Dempsey Lord Smith, LLC Member FINRA/SIPC. Securities offered through Integrated Financial Planning Member FINRA/SIPC. Advisory services offered through Dempsey Lord Smith, LLC. All the information in this letter is published in good faith and for general information purposes only. We do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information is strictly at your own risk.
Send your investment questions to: [email protected].
All the information in this letter is published in good faith and for general information purposes only. We do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information is strictly at your own risk.
