**Hsa Insurance Switch: What You Need To Know**

A Health Savings Account (HSA) is a portable account that remains yours regardless of your employment status or healthcare coverage. You can use your HSA funds to pay for qualified medical expenses at any time without incurring federal tax liabilities or penalties. However, if you switch to a non-HDHP plan, you can no longer contribute to your HSA. In that case, you will have to stop contributing to your HSA, but you don't have to close it. You can still withdraw money from your HSA tax-free as long as the money is used to pay for qualified medical expenses.

If you switch to a non-HDHP, you can no longer contribute to your HSA but you can keep it

If you switch to a non-HDHP, you can no longer contribute to your HSA, but you can keep it. This is because your HSA is yours to keep, no matter what happens in life. However, you will have to stop contributing to your HSA if your health coverage changes to a non-HDHP.

Being enrolled in a high-deductible healthcare plan is a prerequisite for opening an HSA. If you are no longer enrolled in an HDHP, you are no longer HSA-eligible, and so you cannot make further contributions to your account.

However, this does not mean you should close your HSA. You can still own an HSA when you're not HSA-eligible, and you can continue to use your HSA balance to pay for qualified medical expenses. You can also leave the money in your HSA and withdraw it when those medical expenses crop up, even if that's decades down the road. The withdrawal will be tax-free, including investment gains or interest that the account balance earns.

If you later re-enroll in a qualified HDHP, you can resume contributing to your HSA.

You can use your HSA for any expense without penalty once you turn 65

A Health Savings Account (HSA) is a great way to save for healthcare costs while enjoying some tax benefits. An HSA is not designed to be a retirement savings vehicle but can be used to fund other expenses in retirement.

Once you turn 65, you can use your HSA funds for any expense without penalty. However, it's important to note that you will still have to pay taxes on the withdrawal if it's for non-medical purposes. This is similar to how a 401(k) works. Before you turn 65, you will have to pay a 20% penalty plus income taxes if you use your HSA funds for non-medical expenses.

• Housing costs, including mortgage or rent payments and utilities
• Day-to-day living expenses, such as food and transportation costs
• Debt repayment for credit cards, student loans, or other debts
• Higher education expenses for a grandchild
• Travel expenses if travel is part of your retirement plans

Additionally, you can use your HSA funds to cover less common scenarios in retirement. For example, if you become responsible for the care of your grandchild, you may tap into your HSA to help pay for their medical care if you can claim them as a dependent on your tax return.

While you can use an HSA to supplement retirement savings, it's not a substitute for a 401(k) or Individual Retirement Account (IRA). It's important to consider your specific goals and needs when creating a retirement plan and deciding how to manage your retirement account withdrawals, taxes, and other benefits like Social Security.

If you lose your job, your HSA will not be affected

If you lose your job, your Health Savings Account (HSA) will not be affected. The money in your HSA remains yours even after you lose or leave your job. This is in contrast to a Flexible Spending Account (FSA), where you must spend the money by a certain date. With an HSA, you can keep the account where it is, or transfer it to a new custodian without any tax consequences.

If you are no longer enrolled in an HSA-eligible high-deductible health insurance plan, you can continue to use your HSA tax-free to pay for out-of-pocket qualified medical expenses. You can also use your HSA to pay for long-term care insurance, COBRA premiums, or other health insurance premiums if you are receiving unemployment benefits.

If you are over 65, you can use your HSA for any purpose without penalty, although you will have to pay income taxes on money withdrawn for non-medical purposes.

You can use your HSA to pay for your spouse's or dependents' medical expenses

You can use your Health Savings Account (HSA) to pay for your spouse's or dependent's medical expenses, as long as those expenses are qualified medical expenses as defined by the IRS. This is true even if your spouse or dependent is not covered by your insurance plan.

The IRS defines qualified medical expenses as including doctor's office visits and eyeglasses and vision exams. However, cosmetic surgery is not considered a qualified medical expense.

It's important to note that you can only use your HSA to pay for qualified medical expenses for yourself, your spouse, your children, or other dependents. Using your HSA to pay for these expenses does not affect your annual contribution limit. If both you and your spouse have an HSA, your total contributions for the year cannot exceed the annual contribution limit for family coverage. For 2023, this limit is $7,750. An additional catch-up contribution of $1,000 is allowed for savers aged 55 or older.

If you are no longer enrolled in a high-deductible health plan (HDHP), you are not eligible to make contributions to your HSA. However, you can still use any funds remaining in your HSA to pay for qualified medical expenses.

You can invest your HSA funds to earn interest

Health savings accounts (HSAs) are a great way to save for future medical expenses and also offer triple tax benefits. Contributions reduce your taxable income, the money grows tax-free, and withdrawals for qualified expenses aren't taxed either.

You can invest your HSA funds in the same way you would an individual retirement account (or other investment account). You can invest in stocks, bonds, mutual funds, ETFs, and more.

• Determine how much money you will need to cover your current medical expenses. You can set a "cash target" to ensure you have immediate access to cash in your HSA if needed.
• Consider your risk tolerance and potential future medical needs. If you have a low-risk tolerance or expect to need money for medical expenses in the near future, consider low-risk, low-return options such as money market funds.
• If you don't expect many medical expenses in the coming years, stocks are likely to be one of the best ways to invest and grow your HSA.
• If you have a lower risk tolerance or think you might need money for future medical expenses, consider short-term bond funds.
• If you are nearing retirement, consider investing in less-volatile alternatives, such as bonds and dividend stocks.

Frequently asked questions