Health Savings Accounts - New and Improved!
In the waning days of the republican controlled congress an update to the rules governing Health Savings Accounts passed with little fanfare, but the new legislation can make a big difference in the usefulness of HSAs.
As of January 1, annual HSA contributions of $2,850 for individuals and $5,650 for families are allowed regardless of health insurance policy deductibles (you still must use a high deductible plan), and you now have the ability to transfer assets from an IRA into a HSA.
Why is this such a big deal?
If you are a healthy high wage earner or young self employed individual you could find the savings of a high deductible health insurance policy coupled with tax deductible contributions to a HSA very attractive.
Look at the HSA as another IRA. You can reduce current taxes by making contributions to your HSA and when you do have a need to spend the accumulated balance on health care needs you can withdraw it tax free! This makes it like a blend between a regular IRA and a Roth IRA. Current deductions - future tax free withdrawals.
If you retire early, whether by choice or by corporate downsizing, health insurance expenses can be substantial. Often times it is the overlooked expense that throws a wrench in retirement plans.
The new option of transferring money from your IRA into your HSA can ease the burden of insuring yourself and your spouse in the gap between retirement and your eligibility for Medicare. You can lower the expense of health insurance by using a high deductible plan, and by transferring funds from your IRA to a HSA you convert taxable withdrawals into tax free withdrawals.
Health Savings Plans are not yet widespread but this legislation could help change that.
As of January 1, annual HSA contributions of $2,850 for individuals and $5,650 for families are allowed regardless of health insurance policy deductibles (you still must use a high deductible plan), and you now have the ability to transfer assets from an IRA into a HSA.
Why is this such a big deal?
If you are a healthy high wage earner or young self employed individual you could find the savings of a high deductible health insurance policy coupled with tax deductible contributions to a HSA very attractive.
Look at the HSA as another IRA. You can reduce current taxes by making contributions to your HSA and when you do have a need to spend the accumulated balance on health care needs you can withdraw it tax free! This makes it like a blend between a regular IRA and a Roth IRA. Current deductions - future tax free withdrawals.
If you retire early, whether by choice or by corporate downsizing, health insurance expenses can be substantial. Often times it is the overlooked expense that throws a wrench in retirement plans.
The new option of transferring money from your IRA into your HSA can ease the burden of insuring yourself and your spouse in the gap between retirement and your eligibility for Medicare. You can lower the expense of health insurance by using a high deductible plan, and by transferring funds from your IRA to a HSA you convert taxable withdrawals into tax free withdrawals.
Health Savings Plans are not yet widespread but this legislation could help change that.
Labels: health insurance, taxes
posted by Joe Taylor at 3:38 PM
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