Escapees July-August 2024

can contribute $8,300. Those 55 and older can contribute an additional $1,000 as a catch-up contribution. You generally have until the tax fi ling deadline to contribute to anHSA. As you get closer to retiring or hitting Medicare eligibility, the rules get tricky, especially for those continuing to work with employer-provided coverage past age 65. Remember, HSAs are for those enrolled in a high-deductible plan. Since Medicare is not considered an HDHP, enrolling makes you ineligible to contribute to an HSA. The only exception to continue contributing to your HSA is to postpone enrolling in Medicare. As long as you have credible coverage through your employer, you won’t be penalized for delaying your enrollment. Make sure you speak with your bene fi ts administrator to verify you have creditable coverage. If your employer has less than 20 employees, their health plan won’t be considered creditable coverage. It was generally accepted as a best practice for any worker who wasn’t already collecting Social Security at the age of 65 to go ahead and sign up for Medicare Part A (hospital insurance), regardless of other coverage. This would put you in the system and avoid any penalties for late enrollment in Part B (medical insurance), Part D (prescription drug coverage) or other Medicare policies if they continued working with employer-provided health care coverage. Unfortunately, enrolling in Part A of Medicare alone would disallow you from making any additional contributions to your HSA. You can still enroll in the HSA-eligible plan and use funds already in the HSA for eligible expenses, and you just can’t contribute further once you are enrolled in Medicare. To further complicate the process, your contribution limit in the year you enroll in Medicare is prorated. Assuming you enroll in Medicare the month you are turning 65, you add the annual contribution limit plus the catch-up amount, then you divide that number by 12 months and multiply by the number of months you won’t have Medicare. When enrolling in Medicare after age 65 and attempting to contribute to an HSA, you must consider a six-month lookback with this calculation. A best practice is for

Most retirement planning con versations center around creat ing an income level throughout retirement that will allow you to maintain your current lifestyle without running out of money. Often, those meetings focus on the assets you have accumulated, your debt and your anticipated budget. Healthcare expenses in retirement can be a signi fi cant part of your budget, and speci fi c planning is crucial for a comfort able retirement. H ealth Savings Accounts, or HSAs, can be an excellent savings tool to help you cover your healthcare expenses during retirement. HSAs are tax-advantaged accounts designed for individuals with high-deductible health plans (HDHP) to save for medical expenses not covered by their insurance plan. Quali fi ed medical expenses include copays and deductibles, eligible health care, dental and vision expenses, over-the-counter medica tions and prescription drugs. Your unused balance carries over each year, and the HSA can become an investment account used throughout your retirement. HSAsO ff er Triple Tax Savings 1. You can contribute pre-tax dollars. 2. Your earnings are tax-deferred with the possibility for tax-free distributions. 3. You can withdraw the money tax-free now or in retirement to pay for quali fi ed medical expenses. To contribute to an HSA, you must have a high-deductible health plan. In 2024, a high-deductible health plan is de fi ned by the IRS as a plan with a deductible of at least $1,600 for an individual or $3,200 for family coverage. Annual out-of pocket expense maximums (deductibles, co-payments and other amounts, but not premiums) cannot exceed $8,050 for single coverage or $16,100 for family coverage. For 2024, individuals can contribute $4,150 to their HSA accounts, and families

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ESCAPEES Magazine July/August 2024