How to Make HSAs the 401ks for Health Expenses in Retirement

Hello, everyone. Welcome to today's McGriff webinar, HSA utilization strategies, how to make HSAs the four zero one ks's for health expenses in retirement.

This meeting is being recorded and we will send out the recording and slide deck after the presentation.

This presentation has been approved for one hour of SHRM and HRCI credit.

We will include your CE certificate when we send out the recording and slides to our attendees.

Please note that CE is only available for participants who watch the full one hour presentation live.

CE credit is not available for those who may be watching this recording at a later date.

The q and a is open, so feel free to share your questions or comments during the presentation.

We may not be able to answer everything live, but we'll follow-up in a recap email later.

With that, I'll go ahead and pass it over to Christine to get us started. Christine.

Thank you, Kaylin. Good afternoon, everyone, and thank you for joining us today. Hope everyone is having a wonderful day and getting ready for this long holiday weekend.

I am Christine Pegram, and I am with McGriff employee benefits. I'm the specialty program manager for HSA.

I've been with McGriff since two thousand eighteen, but I've been in the insurance and employee benefits arena for a little over twenty years in several different capacities.

And I'll be spending the next fifty, fifty five minutes with you today, hopefully giving you some vital information to help you utilize your HSA and teach you how to share that information with employees and prospects and others to maximize your HSA to, use them as 401ks for retirement benefits.

So let's dive right in.

We'll be hitting quite a few things today. We are gonna go over just some basics. I'm sure everybody here is familiar with what HSAs are. So we're just gonna hit some high points.

We're gonna go over some common myths.

We're gonna look at HSAs first four zero one ks's and dive a little deeper into those. And then we're really gonna dig into some planning strategies, the life cycle of an HSA, and then how it all impacts you in your retirement.

So as I said, most of you are familiar with HSAs.

They are savings vehicles that help offset healthcare expenses.

And by healthcare, it can be medical, vision, dental, over the counter, things like that. They are combined with a high deductible health plan as most everyone knows, and those health plans must be HSA eligible.

Basically, that, means that they must meet the deductible and out of pocket dollar limit requirements that are established under the IRS section code for that.

Those plans can be an employer plan. They can be a spouse or parents plan if you are still on your parents plan.

And they can be an ACA plan. Now, most notably, recent, legislation, did include some additional ACA plans that were excluded previously. So it can be an ACA marketplace plan or through a state exchange, as long as it is, determined to be HSA eligible with, according to that IRS section code.

There are two types of HSAs.

There is again an employer sponsored HSA that is offered by your employer and it can be opened when you're hired or when you become eligible.

That's gonna be according to your employer's eligibility requirements.

It can also be according to a lifestyle, a life event.

And then there's an individually owned HSA. Those are often referred to as retail HSAs.

These are HSAs that can be established through any financial institution that offers them. So you're gonna find these in your credit unions, in your banks, things like that.

And actually, most recently, as of the end of last year, a recent study indicated that there are almost forty million Americans that are covered by an HSA.

And I find that absolutely huge. There's a I mean, these are are very popular plans and people are really, use using them for various reasons. They're using them for planning now and for their future as as we'll demonstrate when we get to the life cycle. So they're not going anywhere. So we need to make sure that we get the biggest bang out of those bucks. And hopefully, I'm gonna give you some ideas to show you how to do that.

So here's some common myths. I love these. I've heard them for a while and most of you have probably, heard them as well. And, I don't think they're ever gonna go away no matter how much we we dispel them.

But we'll we'll cover them today. Some, you know, you may be familiar with, some you may not have heard. And and if if you hear them, you can share you you can debunk them with, some, you know, your colleagues or, you know, if you hear them out.

One major one, is that HSAs are funds are forfeited at the end of the year. Now, this is an understandable myth because a lot of other employee benefits are forfeited at the end of the year. They have a use it or lose it component. So it is understandable for employees to believe that their HSA funds are going to be forfeited at the end of the year or they're going to lose and they're not going to be able to use them. But that is actually not the case.

HSA funds roll over year after year after year after year and there is no balance limit to an HSA. You can have ten thousand in there, you can have twenty thousand in there, you can have two hundred thousand dollars in there. It's going to roll over year after year. It's considered what they refer to an evergreen plan. So once you open it, it just keeps going until you close it or it zeros out, you know, and it's zero for a certain number of months, and then it's considered an abandoned account. But as long as you keep putting money in it, that money is going to keep rolling over and keep earning interest and you'll have it there. You will not lose it.

Another common myth for an employer sponsored plan is I lose my HSA if I leave my job.

This is another understandable myth because again, there are a lot of employer benefits that do get lost when you separate from employment.

You know, there are some COBRA extensions, but taking that out of the scenario, there's there's, you know, a lot of other employee benefits that are just gone when you the HSA is not one of them. Even though it is an employer sponsored HSA and it's under the employer plan, the actual HSA account is owned by the employee and attached to that employee's Social security number. So it goes with them.

Now any payroll deductions or employer contributions do cease. They cease to go in, but the account itself goes with the employee. So it is not lost.

I was, a few months ago, was actually speaking to, a friend of mine who had actually changed jobs and they were talking about an HSA and they made the comment. They said, yeah, I had a really good one, but I lost it when I made a career change. And I said, no, you didn't. And and she was like, yeah, I'm pretty sure I did. And I said, you might wanna, you know, contact your your, HSA administrator. And in fact, she just was under the impression that she lost it when she made a career change.

And she called me a few weeks later and she said, yeah, I reached out and I do have it. And so it is an understandable myth, but it it is not true.

I can no longer use my HSA dollars after I turn sixty five. And you'll notice that I highlighted the word use.

So turning sixty five in relation to an HSA, a lot of things can happen. Yes.

One thing that doesn't happen is you don't have to stop using your money. You can still use your money. Doesn't matter how much you have in there, you can still use it.

There are some Medicare integration considerations, but you can still use the funds.

You just can't contribute anymore to it if you are enrolled in Medicare. That is considered a Medicare enrollment does disqualify you from contributing any more money into it. It does not that disqualify you from using the money. So you turn sixty five, you enroll in your medicare, you retire, you go on and ride off into the sunset and enjoy your life. You don't lose that money. You can still use it. So that is not a a true statement there.

And this is another one that I I love to hear and it is is one that's out there and and a lot of people, feel this way that HSAs are only for wealthy high income earners.

And that is actually the total opposite.

Another recent study showed that sixty four percent of HSA account holders have an income below one hundred thousand dollars a year.

So it's not just for wealthy people. It's not just for high income earners. You have a lot of people that are well below the one hundred thousand dollar income mark that are taking advantage of HSAs.

Again, when we get to the life cycle, I'm going to show you exactly why.

Some of it could be very surprising, but they are being utilized by demographics of the population that a lot of people don't really realize are utilizing them.

Excuse me. Okay. So let's dig a little deeper into, our our specific topic today.

HSAs as four zero one k's.

So when you're looking at the comparison of HSAs and four zero one k's, there are some similarities and there are some stark differences.

One thing is contributions.

Money can go into both.

Money can go into both, through payroll.

So when it comes contributions went into an HSA, the contributions into an A are tax deductible. They are tax deductible both on a pre tax and a post tax basis.

If a payroll deduction is pre tax from your pay, they are not subject to FICO taxes.

If you put money into an HSA on a post tax basis, such as with an individually owned HSA, when you file your taxes, you can get a tax deduction for that, not a tax credit. You can get a tax deduction for that.

With a four zero one k, the tax it is tax deferred, and it is subject to FICA taxes. So what does that mean? And I've got a little notation down there at the bottom of the slide. Tax deductible means it reduces your taxable income.

Tax deferred means it just postpones the tax. So with and some of this maybe you may know, so please excuse my redundancy if you do.

So tax deductible and reducing the taxable income. So with my HSA, if I make thirty five thousand dollars a year and I contribute five thousand through my payroll, then my taxable income is reduced to thirty thousand at the end of the year. Now realizing that there's gonna be other pretax payroll deductions in there, but we're looking at just the for the purposes of the HSA right now. So that's gonna reduce my income tax liability. So uncle Sam is gonna get less of my money.

With the four zero one k excuse me. The four zero one k, that tax is just deferred, and I'm gonna pay it when I take that money out of my four zero one k. But with the HSA, it's just gonna be it's deductible, and and I don't pay it. It reduces my taxable income, and it's done.

If I if you choose to invest your HSA, the investment growth is also tax free.

With the four zero one k, again, it's tax deferred and you are gonna pay it when the funds are withdrawn.

When you take the money out, qualified withdrawals from an HSA are also tax free. Now these three things are what you hear in the industry as that triple tax advantage. It's tax it's tax free going in, it's tax free growing, it's tax free coming out. So as long as you spend that money on qualified expenses at any age, that money coming out is also tax free.

With a four zero one ks, when you start withdrawing the funds, a qualified withdrawal, again, you're it's just going to be taxed as ordinary income in retirement. So there's that tax deferral. It's just going to be taxed as ordinary income. It's never going to be tax free.

With non qualified withdrawals on the HSA, if you are under sixty five and you take that money out or you spend that money on a non qualified expense, so you spend it on a bag of M and M's, that money that expense is going to be subject to taxes and a penalty because you're under sixty five and you've used it for a non qualified expense.

So the tax is for the expense and the penalty is because you're under sixty five.

If you for your four zero one ks, if it's a non qualified withdrawal, it it is also going to be subject to taxes and penalties.

If with the HSA, if you are over sixty five, you can use your HSA dollars for non qualified expenses.

You are not going to be subject to the penalty but it is going to be taxed as regular income and that is going to be the same with the traditional four zero one ks. So any non qualified withdrawals from both accounts post sixty five are going to be taxed as regular income.

Now here's my favorite difference about an HSA versus a four zero one and that's those pesky required minimum distributions.

For anybody that has a parent or if you may have a spouse that, or if you yourself are having to, are at the age where you have to take your required required minimum distributions, it can be very frustrating.

My father-in-law is is of, over that age, and every year, he has to take that money out of his, four zero one k or his IRAs. And whether he needs it or not, you are required to take a minimum amount out of those accounts every single year, whether you need it or not.

And he doesn't need it. And he's like, I don't understand why I have to take this money. And, you know, he has it's taxable.

With an HSA, there are no required minimum distributions.

You don't ever have to take that money out if you don't need it.

And that is one of the best parts, in my opinion, about an HSA in retirement is you can leave that money in there until you need it and let it continue to grow, especially if you've got investments. And there's no requirement to take it out ever if you don't need it. That's one of my favorite parts. You don't have to every year, you don't have to get that little letter that says, okay, here's the amount you have to take and, oh, by the way, because we're making you take it even though you don't need it, you've gotta pay taxes on it. This can be very, very frustrating.

So digging a little deeper here, guys. Stay with me.

How do you maximize your HSA? Now that we know that it's it is a great plan for or a better plan so far for the, than the the four zero one k for some retirement expenses, how do you get the best bang out of your buck? How do you really, really use it to the the the biggest benefit?

Number one is maximize those contributions.

The IRS stipulates a maximum allow allowable contribution every year.

This is based on two coverage levels.

While medical plans will have multiple cover coverage levels or may have, they'll have employee only. They'll have employee plus one. They may have employee plus child, employee plus children, employee plus spouse, family, whatever, you know, maybe.

For the purposes of the HSA, the IRS only has two coverage levels. They have single, which is self explanatory. It is just you, the account holder. And then they have family, and that's you and any one other tax dependent that is on your high deductible health plan with you.

It can be your husband. It can be your husband and a child. It can be you and your husband and three children. As long as there's just one other person that's covered with you on your HDHP.

And there's you can contribute the maximum in that year, tax year, for that coverage level.

So maximize that contribution first.

Then take advantage of employer contributions. If your employer offers an employer contribution, take it. If your employer offers you offers an employer contribution and maybe let's say you can't really afford right now to maximize that that HSA contribution, enroll in the HDHP and contribute what you can, but take advantage of that employer contribution.

You also have a one time, once in a lifetime, IRA to HSA transfer. So what that means is you, once in your lifetime, the account holder's lifetime, time, the account holders social security number can transfer money from their IRA to their HSA once in their lifetime.

Now those first three contributions, all three of those count towards that maximum allowable per the IRS.

So if you are eligible for the family, all three of those count towards that.

You can't contribute the family for each one. It is a cumulative balance. All three of them count towards that. The only one that doesn't count towards that is that fifty five and older catch up contribution, And that is for anybody that is fifty five and older, you can contribute an additional one thousand dollars.

So maximize those contributions.

Get them all in there.

Even if you don't need it, even if you don't need it now, maximize those contributions.

Consider your investment options. What does your HSA administrator offer in investments?

I see a lot of people say, well, you know, I got money in there. It's earning a little bit of interest.

I don't really use it.

Okay? So if you don't need it for expenses, let it work for you. What investment options does your your, HSA administrator offer? Mutual funds, stocks, bonds, some offer a self directed brokerage account.

Look into it, review it. They want they they should have prospectus out there. They should, you know, have performance evaluations out there. If you and I'm gonna go ahead and do my little disclaimer here at the bottom. Consult with your your financial adviser or tax professional to determine the strategies that fit you best. You also want to make sure that it complies with IRS guidelines to avoid any potential tax consequences.

But look at what your investment offerings are.

Invest based on your risk tolerance and timetable.

And a lot of times you can often mirror investments that your four zero one ks offers as well. If you are, if there is a particular mutual fund, for instance, that is performing very well in your four zero one ks, see if your HSA administrator offers that same mutual fund.

Put your HSA dollars in that.

That performance is gonna mirror and you're going to reap the benefits of that.

That investment growth, again, is tax free. So let it work for you. If you don't need to use it, let it work for you.

Strategically pay for medical expenses to allow interest and investment earnings to grow. Now this is where sometimes people have to use their money, but they also want to invest a little bit of it.

So pay for your smaller out of pocket expenses, your over the counter items, your low cost, you know, ten, twelve dollar prescriptions, your allergy medicine, your, you know, sunscreen, things like that. Pay for those over the counter medicines and leave your money in your HSA.

Leave a cash cushion for some expenses.

Keep that and then invest the rest of your money.

Consolidate your HSAs.

So you're we talked about the, my friend that that chain had a career change. She had quite a bit, a pretty good balance in her previous HSA.

And when she contacted her, HSA custodian or her HSA administrator on that one, she said, yeah. You know, they had quite a bit of a balance, but it didn't didn't really have any investment options. You know, they didn't I think it only had one investment option that that she could take advantage of. But her, with her new job, her new employer offered, a quite a, you know, quite a bit more in in investment options. They had a a much better offering. And so I told her, well, you know, transfer it over. So you can make an institution to institution transfer.

And she was also getting charged a fee that was being deducted. So when you when it comes away from an employer sponsored plan, the fee is also often passed on to the HSA account holder because your employer was paying it. But now that you're no longer employed there and it's pulled out from under your employer, they're not gonna pay the fee anymore for you. And some people don't realize that that's happening until they look at their statement.

I'm like, where's my money going? And the divorce is three dollars going or this four twenty five going. So she is in the process of getting that transferred over so that she can move it over into something that is going to help her maximize that interest and investment and get rid of that fee. So yeah, if she was paying three dollars, she was gonna get charged three dollars a month, but that three dollars could be making her more money somewhere else instead of going just disappearing, going in somebody else's pocket.

Excuse me.

So make your money work for you. Make it do these things that will maximize. And again, if you have to use some of it, you have to use some of it.

Now, I will mention that when you're looking at keeping a cash cushion, make sure you pay attention to the investment threshold that your HSA administrator has or your HSA has. Now the investment threshold is usually the minimum amount you have to have in your cash account before you can engage in the investment options.

The stand excuse me. The standard is two thousand dollars but it can differ depending on the HSA administrator and oftentimes this is a customizable option that your employer can change. They can raise it or lower it but we'll use two thousand dollars as the example for this.

So if your investment threshold is two thousand dollars and you get to three thousand dollars in your cash balance and you wanna start investing.

If you invest that whole one thousand dollars over the investment threshold and let's say you have to use some of that money. Let's say you have to have a procedure and you're out of pocket for that procedure is gonna be five hundred dollars and you go and you pay that five hundred dollars well that's gonna drop your cash balance down to fifteen hundred dollars. So that's gonna cause what that's gonna cause a forced sell of your investments to put five hundred dollars back in your cash account to get that threshold back to two thousand dollars.

So make sure whatever investing that you're doing and leaving your cash cushion for expenses that you leave a little bit of wiggle room so that you don't, jeopardize your investment, picture there. And you don't cause a forced sale without knowing it. So keep an eye on that. You can always move investments back if you need more money.

But and you can you can not move money but in investments as your contributions come in. You can just pause moving them over.

If you do automatic sweeps, you can pause those, and you can just leave what you've got in there. But just keep an eye on that threshold. Make sure you know understand what that threshold means and how it could impact your investments that you already have in place so that you don't have any surprises when you start looking at your investments and, especially one that's performing well. You don't wanna have any surprises there that you weren't expecting.

Okay.

So here's where I this is one of my favorite parts about educating folks on maximizing their HSA is showing them the life cycle of an HSA and explaining to them.

I always tell people but figure out where your HSA meets you. Where are you in the life cycle of an HSA so that you can plan properly?

I love HSA planners. If if you are with an HSA administrator and they have an HSA tool and or you're not sure, look for one. If they haven't used it, I love HSA planners. They really, really help you figure out how to do all of this.

What what do I need? What do I want? Where do I want, you know, to be? Where what do I want my retirement picture to look like?

You'd be surprised at how quickly you can grow your balance by knowing where you are in your HSA's, the HSA life cycle, where your HSA can meet you and and how much time you have to make it grow and and maximize it.

So, I'm gonna start from the beginning and and this is the for this this group, I call them the young single adults. These are these are the folks that I categorize eighteen to twenty six, and they could be recent graduates, college or high school.

They're just starting a job, so they probably have lower incomes.

They may very well still be on their parents' health plan.

Fairly healthy, so they have few, medical expenses.

They can contribute the max based on their coverage level because they probably have few expenses. They may still be living at home or they may just be starting out and have roommates. So they probably don't have a whole lot of living expenses either.

They can contribute the max based on their coverage level.

They can start investing.

They have a usually have a higher risk tolerance and they can let it grow. And I I I call this this category the savers.

And I actually actually have, a member of my family in every one of these, categories except for the last one, of course. My son, he is twenty five. And when he graduated from college a few years ago, he started working for his dad's company. And they have, they offer an HSA, and they do not require that their employees enroll in their group medical plan to participate in the HSA.

So he stayed on, and he's still on my family high deductible health plan and he can enroll in that HSA. And because he's on a family high deductible health plan, he can contribute the family max to his HSA. He doesn't have any medical expenses. He gets his annual checkup, every year and an occasional sick visit. He does have some seasonal allergies. So he, you know, gets it has an occasional sick, sick visit.

He contributes to Max, he started investing it. He doesn't touch it.

He's done that. This is his third year doing that. And the other day I asked him, I said, so what just out of curiosity, what's your balance looking like? And he's at towards the end of this year, He'll probably close-up this year with probably close to almost twenty thousand dollars in that HSA and he hasn't touched a penny of it and he can continue doing that now he'll age off of course at twenty six, but he just got married this year so he'll go on his dad's plan, he and his new wife.

And again, they will be on a family plan, and he can continue contributing the family max. And when they get into the next age group, then their, life cycle will move up a level, and then their HSA maximization picture will change. But these three years, he's been able to get the biggest bang out of his buck possible, and he has already started very, very well out. And that's I mentioned earlier, you'd be surprised how quickly you can get a head start on these.

And that is a a very good example of just that.

And initially, he was one he's like, well, I don't really need it. You know, I don't I'm not sick. I don't have, you know, a lot of expenses. Why would I need to do that? And he was surprised.

He's in in this age, category. They also already get a pretty good, tax refund.

And he really wasn't worried about the, income tax benefit, but he's got that money. So now he's like, okay, I'm with you mom. So, you know, he he One time he listened to me. This next category that he'll move up to is that I call it established adulthood.

They're twenty six to fifty, maybe, they're advancing in their career.

They're maybe, getting, middle ish income type. They're either married or thinking about getting married.

They're either already starting, you know, have children or starting to have, you know, do their family planning.

So with that, and, you know, unfortunately, with age, you know, your health care expenses start to, you know, you start to have a little bit more, with healthcare expenses, you have some age related maybe health issues. Your family planning itself is, can cause some additional healthcare expenses.

Well baby visits, you know, when you have kids and especially if they're in public daycare, public school, you know, you're gonna have them.

The that's just that's just gonna happen. You're gonna have a lot there.

These folks will then enter the phase where they have to spend some and save some.

So they are gonna have to use some of their HSA dollars.

These folks I refer to as, a hybrid. So they do, they can't just put it all away, keep it there and let it grow.

They have to the kinda save some and spend some. Now, excuse me, they don't necessarily have to pull any money out of their investments, but they have to start spending some of their money. So they can keep what's in there in their investments already. They can leave that alone. But they have to start spending some of their money on health care expenses because of their lifestyle changes, which is understandable.

So they can maximize their HSA dollars by adding a limited purpose FSA if it's available through their employer. And I actually do this, even though I'm not in this category anymore. I actually do this one option with my HSA.

I added a limited purpose FSA a couple of years ago.

I wear glasses and my husband wears glasses. And we have the the little fancy glasses with the lines in them, and we need the prescription sunglasses as well.

And, we both needed a little bit of dental work. And I didn't want to have to use my HSA dollars for all of that because that would just take a lot a big chunk out of it. So a limited purpose FSA is for dental and vision expenses only. And it is the only one that can marry with an HSA and a high deductible or the HSA with a high deductible health plan. Now you can have a limited FSA with a PPO, but you cannot have a, general purpose FSA with a HSA. You could only have the limited purpose FSA with the HSA.

So I have a limited purpose FSA.

I don't max that out because that is a use it or lose it plan. But I use that money for my dental and vision expenses, and I keep my HSA dollars for my medical expenses.

Now if my limited purpose FSA dollars run out, then, yes, naturally, I have to dig into my HSA for my dental and vision. But until I exhaust my limited purpose FSA, I can use those dollars for my dental and vision, and I don't have to tap into my HSA.

So I'm able to leave my HSA alone for those dollars. So this is something that this this group can do and actually any group can do. But you can keep you can leave your HSA dollars alone by adding this plan if it's offered through your employer.

Again, with this, category, they may have to move to, if they're not already there, they may have to move to a high deductible health plan to save on medical premiums out of their pay, especially if they have a large family.

Our oldest daughter is had to do that this year. Actually, I told you I had an example in each category.

Their company, they were on the PPO. It's her and her husband. They have three children.

All of them are under ten. And when their PPO plan, the premium went up, the it was just an astronomical jump in the premium. And, she came to me with her open enrollment packet.

And I said, well, why aren't you on the HDHP and get the, HSA? She said, I can't afford that HSA dollars coming out of my pay. I'm like, well, can you afford the premium coming out of your pay? She said, no.

I said, okay. Move to the HDHP. That's gonna save you x amount of dollars on your premium. And then what you would have been paying, put it just have that redirected to the HSA.

You're still gonna be paying for the doctor's visits and the prescriptions and stuff like that, but you'll be paying per with pretax dollars. It'll be there. And she was on the PPO with an FSA, and she was always scrambling at the end of the year so she wouldn't lose her money. And so she moved over to the high deductible health plan, and she had that extra money redirected to the HSA.

And, you know, she she'll it is like I said, she's still spending the money. She's still spending the money when she goes to the doctor because, again, kids in public school and they're gonna get sick.

But now she's she's still got the pretax benefit with her taxable income being lowered with that. She's still spending the money at the doctor, but she's got that money sitting there in her HSA. And if she doesn't use it all by the end of the year, she doesn't have to scramble for fear of losing it. And of course, now she's saying that that was the greatest idea she she ever came up with.

But that that that is something that some people have to think about when they start growing their family.

They do have to look at the premium considerations for their health care when they get, you know, get that that large family size because the premiums do go up and employers are facing higher premium costs no matter how much you you like it. The premium costs are, going up every year no matter what we would like to happen.

As I said, this category may pause putting money in their investments, or they may move to a more moderate risk if they were in the high risk category. They may drop down and say, okay, not getting any younger, need to really start looking at keeping, you know, as much money as I can in there, and they move to a more moderate risk.

The balance is still gonna grow. That investment balance is still gonna grow.

But they're gonna kinda be a little bit more protective of that growth. And if they pause moving money into their investments because they have to spend some, what they already have in there is still going to grow. And what they have in their cash balance is going to start is going to earn interest. And again, all this growth is tax free as long as they spend it on eligible expenses.

So this next category is pre retirement and I learned that phrase at a recent conference.

I used to refer to this as actually like forty five to sixty five as middle age, but I found out at a conference that pre retirement. It kinda hurt my feelings because I'm in here. Like, wait a minute. So these are gonna be your empty nesters.

These folks are often gonna be at the top of their career. They're gonna be the higher income earners.

They're still probably gonna be fairly healthy. They may have some minor age related issues, but they may be because of their higher income earnings, they may be willing to pay out of pocket more to maximize their maximize their HSA growth.

Once they hit fifty five and over, they can contribute that extra one thousand dollars every year.

And they often become savers again because they, like I said, they're empty nesters. They don't have, the expenses with the children, and they may be willing to pay out of pocket more. So they're gonna be the savers again.

And they may very well reengage in their investing. They may be moving their money back over, more money back over into their investments.

They are likely still gonna stay moderate, but they're gonna be moving more money from their cash account over to their investment account because they don't need to spend as much or they're willing not to spend as much. They're gonna wanna grow it.

One other thing that, and this just happened, a couple of weeks ago.

They had, a friend of ours was, retired and was sold a business sold his business, and he offered HSAs through his business.

And he was wanting was wondering what to do with his HSA and, the HSA custodian that they had.

It was a very they had had it forever. And it was excuse me. It was a a very good good company, but they had not really delved very deeply into investment options. They had some. They had some good ones, but they haven't hadn't really experimented with a very broad offering of investment options.

And he was, looking at, a HSA, that his personal financial planner had found that had a self directed brokerage account attached to it, which his former HSA administrator didn't offer.

And so, he asked me, he said, so can I transfer that HSA into this other HSA because I wanna do that? I said, absolutely.

It's an institution to institution transfer.

So he was not sixty five yet. He had retired from his job and sold his business, but he was not sixty five yet.

So he transferred that balance into another HSA. Again, it was an institution to institution transfer.

It was a large balance.

And he worked with his financial adviser to make that transfer, And now he is able to take advantage of a self directed brokerage account. He doesn't need the money yet, and he is going to maximize that. And he's, he's a a rather seasoned investor. And, again, he's working with his financial advisor and it's going to absolutely explode.

So that's another thing that you you might see in this category. As you see people that might be getting out at sixty selling businesses, they have a few more years yet to go. So they're gonna be looking for somewhere to put their money and they're gonna be working with a financial planner to say, okay, I've got five years of contributions left. What's the most I can do and maximize it?

Okay. So now we get to that last category retirement.

And that's sixty five and older.

So number of things happen here as well.

People may or may not leave their jobs.

A lot of people are not leaving their jobs at sixty five. I don't know that I'm gonna be one of those people, but a lot of people are not leaving their jobs.

At this age, you may start to see more health related issues.

Their so their health issues likely increase.

Their Medicare and, you know, they're looking at Medicare and Medicare enrollment does disqualify you to contribute. We all know that.

But they do look at some Medicare considerations. They're looking at like, okay, what do I wanna do? Do I wanna elect my Medicare?

If you are getting ready to turn sixty five and you decide to continue working and defer your Medicare, including Part A, you can continue to contribute to your HSA.

But you have to defer A, B, the whole nine yards. You have to defer it all.

And I highly, highly, highly, highly recommend you consult with a Medicare professional, someone that knows the ins and outs, upside downs and backwards of Medicare to guide you in this. Because when you do decide if you do defer and continue to contribute, when you do decide to later enroll, there could there is a look back period that could pose some tax consequences if it's not done right. But it can be done and it can be done correctly so that it doesn't pose a potential negative tax consequence for you. But you can defer and we have I know a lot of people that do it.

They're just not ready yet. And they're well in, you know, above sixty five. And they're still working. They're deferring both, and they're still contributing.

But make sure you get with a a someone that knows Medicare, that's certified in Medicare and to guide you in this step because it can be crucial to make sure that you don't have a tax consequence.

Now, if they do decide to stop contributing, and go ahead and start using their money, they're they may leave their they can leave their investments intact. They don't have to pull their money out of their investments. They can leave them alone.

And they can pull the money out of their investments to their cash account as needed. But whatever else stays in there can continue to grow as long as they want to. They don't have to pull it out unless they need to. And when they need to, they can move it over.

So now we've gotten to retirement.

We've done all this work.

What can we use the money for?

Well, you can use the money for basically the same things you could use it for before. Doctor's visits, over the counter items, prescriptions, deductibles, long term care services, dental and vision expenses.

But now you can use it for Medicare premiums.

You can use it for Medicare part well, some people do have to pay part a premium since it's specific circumstances. So you'll know if you have to.

Part b premiums.

You can use it for part d premiums, which is your prescription drug plan, and you can use it for Medicare Advantage premiums. The one that you cannot use it for is your Medigap plans, also referred to as Medicare supplement plans. You cannot use your HSA dollars for that. But you can use it for anything else that you could use it for before.

So you can save your four zero one k dollars. You don't have to use your four zero one k dollars for your medical expenses because you've worked so hard all of these years to save all this money and maximize your HSA.

And remember as long as you're using it for eligible expenses, eligible HSA expenses, there is no tax. So the money that you would have to pull out of your four zero one ks to pay this is taxed.

Regular income. But if you're using these dollars for eligible expenses, you're not taxed. So you can leave your four zero one ks dollars alone, use them for a trip, make it worth your while.

You don't have to use this money.

For the medical or use that money for this stuff. You can use your HSA dollars. It's tax free and you're done.

And if you happen to not use all the money and the unfortunate circumstance comes around and you pass away with unused benefits in your HSA, there is a death benefit with an HSA and the unused portion when that when that unfortunate time comes, you don't have the difficult conundrum of having to provide, you know, estate paperwork and all that stuff. You don't wanna make it difficult for your family in that time.

So there is a death benefit if you don't use it. But just imagine if you start, back here or if in any one of these and you maximize it, you get to this point and you sail off into retirement, imagine the worry that's lifted off of your shoulders for your medical expenses because you've maximized your HSA and you have money to pay those medical expenses tax free and leave your four zero one ks or IRA alone. Now none of this is still gonna help you with this pesky requirement distributions that you have to take and be taxed on. But at least you'll know that the, medical expenses that you're gonna have are gonna be taken care of tax free because you've done so well with your HSA.

Okay. So that is the end of the presentation.

Let we have a few minutes for questions. Let me jump over here and see what we've got.

Let me go down here. I'm gonna try to take them in the order that they were sent in.

The first one, is there a limit on the amount of the once in a lifetime transfer from IRA to HSA?

Yes. So whatever coverage level you are in, whatever your maximum allowable is based on the coverage level, that you're in for your, normal contribution maximum. That is the same amount.

So if you're at the, family coverage level, that's the most you can contribute. If you're at the single coverage level, that's the most that you can contribute. And may and just keep in mind, if you contribute the max from your IRA to your HSA, you cannot accept any other contributions be it payroll pre tax payroll deductions or an employer contribution.

So make sure you consult with a tax professional before you do that. Because if your employer contributes five hundred dollars automatically, and then you contribute another what you know, ninety three or eighty three hundred, for the max, you're gonna be you're gonna have an excess contribution scenario and you're gonna have a a tax consequence because you've actually exceeded the maximum allowable for a family contribution.

So it's the same statutory max that's for everybody based on your coverage level. There's only two.

Next question. To clarify, if both parties and a married couple are fifty five plus, are you saying they would each have one thousand catch up contribution?

Very good question. This was one of the components that was in the big beautiful bill that we wanted, but it was not passed. It was not included in the bill as passed.

So no.

The person whose social security number is attached to that HSA is the only person that can contribute that one thousand dollar catch up contribution.

The spouse if they have an HSA under their social security number, they will have to contribute that one thousand dollars in their HSA again. That was uh-uh one component of the big beautiful bill HSA expansion that was entered, but it was it was taken out in the bill that was passed Efforts will be made later down the road, so I hear to try to get it in at a later, session. But that was one of the things that they took out.

So that is not allowed at this time.

Next question. HSA money can be used for COBRA, but not for Medicare supplements or other medical insurance premiums. Correct?

Not really sure I understand that question, but I will reach out to the person who submitted that to get a little bit more context. Again, all these will be in a FAQ that I'll send out to everybody. So I'll include that when I'll get a little bit more context.

And then, I'll include the answer on that one.

Next question. Is it possible to defer an HSA withdrawal for a qualified medical expense? For example, suppose in twenty twenty five we had a child and the hospital bill was ten thousand dollars we covered the entire bill out of pocket without using HSA funds, then in twenty fifty, twenty five years later, could I withdraw the funds from the HSA and reimburse myself for that hospital expense provided I had a receipt? Okay. So, not really sure I understand that complex question completely, but let me talk about HSA reimbursements and receipts. So when you have when you open an HSA, when you qualify to open an HSA, that is when you can start reimbursing yourself for for expenses.

So if I open my HSA on January first of twenty twenty four, and I have I can start using those funds for receipts anytime after January first of twenty twenty four.

Do I have to pay myself for an expense on the day it incurred? No.

But when I reconcile my HSA when I go to file my federal tax, tax return, if my HSA is audited, any money that I have spent, they are gonna want to show receipts in the audit for that money. So if my HSA is audited in twenty twenty seven, and I've spent fifteen thousand dollars over the last three years, they're gonna wanna receive see receipts for all fifteen thousand dollars regardless of when they were incurred.

If that makes sense. So if you pay yourself, you know, ten thousand dollars regardless of what year and your HSA is audited, they're gonna wanna see a receipt for that ten thousand dollars regardless of when it incurred. And if you were eligible if you had an eligible HSA, and then you could pay yourself back. You don't have to you don't have to reimburse yourself the day that the the expense incurred.

There's a lot of people that, then and there are some HSA's out there that don't have a debit card. So people have to submit manual, reimburse they have to reimburse themselves. So they'll just collect a bunch of receipts, get a lump sum, and keep the receipts with that lump sum.

So as long as the expenses were incurred after you were had an you were eligible to open and contribute and utilize an HSA. Keep your receipts. And if your HSA is ever audited, whatever amount you reimbursed yourself and you have receipts to back it up, they're gonna want those receipts if you're audited.

Okay. So that's the end of the time for questions. I will answer the rest of them. I will reach out to everyone individually and I will include them in an FAQ.

Thank you all for your time today. I hope you got something valuable out of this.

And I appreciate your attention, and I hope you enjoyed it. And I'm gonna turn it back over to Caitlin.

Alright. Thanks, Christine.

And thank you all so much for joining today's session. As a reminder, we will be sending out both the presentation and recording so you can revisit the material at your convenience.

But we look forward to seeing you at our next webinar. Bye for now.