Brian Livesay San Diego Retirement Guardian |Tax Advantaged Health Savings Accounts

Tue 28th, 2015

Brian Livesay San Diego Retirement Guardian says “Health Savings Accounts are a unique investment vehicle that if used correctly can add tax free funds to an individual’s finances.”

A Health Savings Account or HSA is a tax advantaged medical savings account. To be eligible for an HSA an individual or family must be enrolled in a High Deductible Health Plan (HDHP). A HDHP has a higher deductible than a traditional health plan and can be considered a catastrophic health plan. These plans are best for younger and healthy individuals with little annual medical requirements. The annual premiums are lower than a traditional health plan which allows an individual to fund the Health Savings Account.

Contributions to an HSA account can only be made while covered under a High Deductible Health Plan.

Once an individual is no longer covered the HAS account remains open and the funds in the account continue to grow tax free until the time of withdrawal. A HSA is very similar to an Individual Retirement Account (IRA) since the accounts are funded with pretax money and grow potentially tax free if the money is used on qualified medical expenses. If the money withdrawn from the account is not used for qualified medical expenses there is a 20% penalty on the withdrawal if taken before age 59 ½. Non-qualified medical expense withdrawals taken after 59 ½ like a Traditional IRA are taxed as ordinary income in the year of the withdrawal.

A unique feature of an HSA account is the ability to make withdrawals and use medical expenses from previous years while covered under the HDHP as qualifying medical expenses to avoid the 20% penalty for non-qualified medical expense withdrawals. As long as the individual has the receipts from the qualifying medical expense the expenses can be used in any year to make an allowable withdrawal from the HSA account. This allows an individual to pay for smaller medical cost in one year and let their money grow tax free inside the HSA then withdrawal money later after it has grown in value tax free using the past paid medical expenses as qualifying medical expenses at the time of withdrawal.

The IRS also allows a onetime transfer from an IRA account to fund a HSA account up to the annual maximum contribution limit for the year. Employers can also contribute to an individual’s HSA account and the money becomes immediately the account owners with no vesting.

A healthy individual with minimum medical needs can potentially grow substantial funds inside the HSA account and later use the funds like a Traditional IRA or as tax free funds using qualified medical expenses at the time of withdrawal.

For more information visit Brian Livesay’s Who Is Page here in the Journal

Or see the article in Small Business Trendsetters

Or the article in CNN iReport ” Statement of Cash Flows: Cash is King”

Brian Livesay The Retirement Guardian
You may contact him at his office
Livesay Capital Solutions Inc.
1761 Hotel Circle S. Ste 360
San Diego, CA 92108
Call at 866-726-0725 / 619-281-8377
Or visit his Web Site www.retireestaxgroup.com

by Chet Bruce in Financial Planning, Financial Views, Health Insurance, Tax Planning with 35 comments

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