You have been putting money away for years. You wanted to be prepared in case there were some emergencies so you wouldn’t have to come up with a lot of money out of pocket. But many people wonder what will happen to their HSAs at age 65? This is the time when you can begin qualifying for Medicare, and often these two cover the same things but can’t be used in the same way. If you are 65 and have been putting money in your HSA for many years, it is possible to keep this going, you just have to go about it the right way. Let’s take a look at HSAs at age 65 and how the Tax Alternative Group can help you get the most out of this savings plan.
A Look at This Savings Plan
The health savings plan is a great way for you to save up some money for your big medical bills. You can open one of these up from a wide variety of sources, but it is meant to help you pay off your medical bills when they come. While you will have to deal with a higher deductible compared to some insurance plans, there are some great benefits of going with this option. You can enjoy a tax deduction on the money you put into the account, you can earn interest on the money, and if you use the money for medical reasons, you will never be taxed. The best part is this money can keep accruing. If you don’t use all of it in one year, it will stay in the account and receive interest to use later.
This is a great way to make sure that you have the money you need when the big medical bills come. You can start this at any time, and even if you never have enough medical bills to go through the deductible for 10 years, all of the money you put into the account will be ready when that big bill does show up. This helps to take some of the burden when it is time to pay these expenses. The professionals at Tax Alternative Group can help you to claim the deductions for this account on your tax return to save you even more during tax season.
What to Do When You Turn 65
When you turn 65, you are able to qualify for Medicare. This makes the HSA not as valuable as before since many of your medical bills will be taken care of for you. But this doesn’t mean that you lose all that money in the account. Rather, this is going to be changed to more of an IRA when you turn 65. You will be able to use this money for things other than medical expenses or save it in case the medical expenses get above your Medicare benefits. You will not be able to use this money in order to purchase any supplemental insurance to go with your Medicare benefits.
If you do choose to take some of the money out of your HSA for non-medical reasons and to use this as more of a retirement account, you must keep in mind that this money will now be taxed. As long as the money was used for medical reasons, you would never be taxed on it, but once you use it for personal reasons, you will need to claim it on your tax returns. Often, it is best to leave the money in the account and allow it to accrue interest over time rather than being taxed on it to use for something else; eventually, whether it is a big hospital stay or some other reason, you will probably have an expensive medical bill show up.
If you are considering whether to use the money as monthly income or save it for medical expenses, contact the professionals at Tax Alternative Group. We can go over the numbers with you and help you determine which is the best course of action for your situation.
Get the Most Out of It
You worked hard to put that money into the health savings account, and now that you are 65, you will need to make sure you make the most out of this money. For most people, it is better to keep the money in the account. You never know what medical expenses will come later, and when you’re retired, it is harder to come up with money to pay off these bills. Plus, if you take the money out early, you are going to be stuck with the taxes.
While the decision is ultimately yours, it is best to speak with a tax consultant to help you decide what is best for you. If you need the money right away to help pay with other bills, it may be worth the taxes to take the money out of the account for personal use. On the other hand, if you are able to wait, this is often best. Even if you take the money out for personal use later on, you at least saved up some more interest on it.
Looking to work on your tax returns or need help understanding your tax benefits with an HSA? Contact Patrick O’Hara at Tax Alternative Group, LLC in Poughkeepsie, NY to get started. We have the professionals you need to get your taxes done right the first time, no matter what your unique situation may be. Contact us today to get started!
