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Self-Directing your HSA Can Help Boost Your Savings for Future Medical Expenses, Tax Free

Self-Directing your HSA Can Help Boost Your Savings for Future Medical Expenses, Tax Free

It’s common today for people to have a high-deductible health plan (HDHP)—one with a higher annual deductible and out-of-pocket maximums (and slightly lower premiums) than typical health insurance plans.

Those high deductibles may be a hard pill for many people to swallow, but HDHPs allow individuals to open and fund a health savings account (HSA). HSAs provide three tax-advantaged ways to save and pay for qualified medical expenses. The tax benefits of these accounts are:

After a person hits 65 years old and is on Medicare, he or she can no longer contribute to the HSA but the funds may be used for other expenses without penalty; however, any non-medical distributions are treated like those from a Traditional IRA and subject to income tax on the distribution. Unlike a Traditional IRA, there are no required minimum distributions.

Your savings can accrue year after year, just like in an IRA. And just as you include alternative assets within your IRA, you can also invest the money you accrue in your health savings account—and purchase alternative assets to build up your savings for the future.

Self-directed HSAs

Just as with any self-directed retirement plan, you can give your health savings account a boost by including nontraditional investments such as real estate, precious metals, notes, private equity, and more. Self-direction allows you to use your expertise in the investments you’re passionate about, and may bring you comfort in knowing you’re making your own investment decisions. And, if you have relatively low medical costs and build up a healthy balance in your HSA, you have another avenue for growing your retirement savings with the potential for higher yield than the returns on a typical savings account. The broad array of diverse investments allowed through self-direction also provide a hedge against stock market volatility.

The contribution limits for HSAs in 2020 will be $3,550 for an individual and $7,100 for a family; individuals 55 and older can make an additional $1,000 catchup contribution.

You can have more than one HSA and you can transfer funds between them—so you may choose to use one to cover medical expenses or medical emergencies and another building wealth as a long-term investment for future medical expenses or supplemental retirement income. With health care costs continually rising, and today’s workforce expected to need at least $260,000 to cover medical expenses during retirement, having a self-directed HSA can help.

By including alternative assets and self-directing your health savings account, you’ll have more options for creating a cushion for medical or other expenses when you retire—and you’ll maximize your HSA contributions while you are able.

If you have questions about self-directed HSAs or any self-directed retirement plans, Next Generation can help with one of our complimentary educational sessions. Or, contact our team about self-directed IRAs and the many types of nontraditional investments these plans allow. We’re available via phone at 1-888-857-8058 or email:

Using Your Self-Directed HSA During Retirement

There’s Value to Funding Your Health Saving Account Today, to be Used in Retirement

According to a new joint study by the LIMRA Secure Retirement Institute and the Insured Retirement Institute (IRI), only 25 percent of Americans with a health savings account (HSA) plan to use the assets in their accounts for health care costs they incur in retirement. The survey revealed that many people don’t realize they can use the accumulated assets in a health savings account to pay for medical bills and long-term care expenses when they’ve retired.

While one is still working, the funds must be used strictly for qualified medical expenses. In retirement, the money can be used for other purposes as well. That said, with the rising costs of health care in the U.S., investors who participate in a health savings account are smart to fund theirs for future medical and long-term care costs if they can afford to do so.

Contributions to a health savings account are tax deductible, the assets grow tax free, and withdrawals are tax free and penalty free when used for qualified medical expenses up to age 65. After age 65, the funds may be withdrawn for other purposes without penalty but those withdrawals will be taxable. Note that once you are on Medicare, you are no longer eligible to contribute to your HSA but you may continue to withdraw the funds.

Self-directed HSAs

Did you know that self-direction is not restricted to IRAs? You can also self-direct your health savings account, which can help you build up a bigger nest egg for medical expenses—in the near or more distant future. You can even use the assets to pay your Medicare premiums once you reach age 65.

By including alternative assets in a self-directed HSA today, you can take advantage of the different markets you know and understand, and grow the savings you are likely to need for health care when you retire. With the estimated cost of health care now in the hundreds of thousands per individual retiree, the more you can do to boost those savings now, the better off you and your wallet will be later. You can read more about self-directing your HSA here.

If you’d like to open a self-directed HSA, contact Next Generation Services at or 888-857-8058 and we’ll help you get started.

What is a Health Savings Account?

A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

What Is a “High Deductible Health Plan” (HDHP)?
You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover.