Using annuities in trusts
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According to Healthcare.gov, the definition of an HSA is “A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs.”1
When it comes to retirement planning and paying for health care costs, everybody is unique, but we’ll go through the how an HSA works, the pros and cons of an HSA, and how you can use an HSA for retirement planning, to help decide if an HSA is right for you.
A health savings account (HSA) is an account to help you save for health care expenses either now or in retirement. Health care expenses that an HSA can be used for are medical, prescriptions, dental, hearing, and vision. An HSA can also provide potential tax benefits, which we’ll get into later. Since a health savings account reduces the need to use your personal savings for health care costs in retirement, you can give yourself confidence in how you’ll help pay for future medical expenses.
To use an HSA, you must be enrolled in a high-deductible health plan (HDHP). Once you’re in the HDHP you can either open the HSA on your own or through your employer, if offered. An HSA allows employees to contribute part of their earnings directly into their HSA, pre-taxed during their working years before they turn 65. For 2022, the contribution limit is $3,650 for an individual with self-coverage and $7,300 for an individual with family coverage.2
When deciding whether to use an HSA, there are a few advantages and potential disadvantages to be aware of to help you make the decision if utilizing an HSA is right for you.
Many Americans are worried about how they are going to pay for their health care costs in retirement. According to Nationwide’s Health Care and Long-Term Care Consumer Survey, 80% of Americans cannot accurately estimate how much they expect to pay for health care in retirement.4 As we mentioned above, since health savings accounts offer potential tax benefits, they are a great way to pay for current health care expenses but also save for expenses that will arise in retirement. If you can afford to put extra money aside now, you are allowing your funds to potentially grow and be worth more when you are ready for retirement.
While only you can decide if an HSA is right for you, it’s important to think through the potential benefits and disadvantages that come with an HSA account. If you still have questions or additional concerns about utilizing an HSA account, a financial professional can help you learn more and provide more guidance.
For more information on health care cost planning, view our resources that you can discuss with your designated financial professional.
 “Health Care and Long-Term Care Consumer Survey,” conducted by Harris Poll on behalf of the Nationwide Retirement Institute (2018). The fourth annual survey was conducted online within the United States from Feb. 5 though 22, 2018, among 1,007 adults ages 50 and older who have a household income of $150,000 or more (“affluent adults”), and 522 adults ages 50 and older who are or have been caregivers.
*HSAs are not taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states, but not all, recognize HSA funds as tax-free.
Investment available to HSA holders are subject to risk, include the possible loss of the principal invested.
Nationwide and its representatives do not give legal or tax advice. An attorney or tax advisor should be consulted for answers to specific questions.