You Can Self-Direct your Health Savings Account
Published on April 25, 2017
Many people now have the option of having health insurance with a health savings account (HSA), which saves them money on their monthly insurance premiums (and gives them extra cash to fund these accounts). People who have high-deductible health insurance plans may open and fund a health savings account, from which they pay their out-of-pocket medical expenses.
Here’s a look at the 2017 contribution limits for HSAs, which reflect a slight increase over 2016 figures. Note that many of these plans are offered through the workplace along with
employer-sponsored high-deductible health plans.
|HSA contribution limit (employer + employee)||Self-only: $3,400|
|HSA catch-up contributions (age 55 or older)||$1,000|
|HDHP minimum deductibles||Self-only: $1,300|
|HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts; excludes premiums)||Self-only: $6,550|
Health savings accounts offer triple tax advantages:
- Contributions are deductible from taxable income.
- HSAs grow tax free.
- Withdrawals are tax free as well as long as the money is used for qualified medical expenses up to age 65.
- NOTE: once the account holder reaches age 65, the funds may be used for any expense, not only health care, without paying a penalty. If you use HSA money for nonmedical expenses before age 65, you will pay income tax on the withdrawal plus a penalty of 20 percent. After age 65, you will pay taxes but no penalty.
Another plus: HSAs are portable, so if you switch employers the money goes with you.
These plans are not to be confused with flexible spending accounts for health care; HSA balances can be carried over from year to year, enabling individuals to build up tax-advantaged savings in those plans. The money can be invested in order to grow, which means these can be a great vehicle for self-directed investors who are looking to build additional retirement savings.
You can self-direct your HSA
If you don’t need the funds you’ve contributed to your HSA for medical expenses today, you might consider making some nontraditional investments in order to build up the balance for the future. You can do so with a self-directed health savings account.
As with all self-directed plans, you may include a broad array of alternative assets in your account; if your plan is offered through your employer, find out what types of investments are allowed. In addition, remember that if you are self-directing your HSA, it has to be with a custodian who allows for self-direction; your employer should check to see if you can move the HSA to the provider you want.
Our helpful professionals at Next Generation Trust Services are available to help you get started or answer your questions regarding contributions to your HSA or about the types of nontraditional investments allowed in self-directed plans. Contact us at Info@NextGenerationTrust.com or 888.857.8058 for more information about injecting an energy boost into your retirement with a self-directed HSA.