Aging and Your Health Savings Account:

As we age, health care and health care insurance become some of our primary concerns. The advent of the Health Savings Account has made it easier for many people to meet their health insurance costs, while enjoying tax benefits at the same time. However, this does not mean that a health savings account is the magical answer to aging health care. There are specific good points and bad points of an HSA that you will need to consider in correlation to your aging needs.

Let's take a look at some of the good points first.

Long-Term Care

Long-term care is something that each American may have to face. Many insurance companies do not provide this type of coverage and when you do find it, premiums and deductibles can be very expensive. The good news is that health savings accounts do provide a way to pay for these long-term care costs and insurance policies, and in many cases, you can do so tax-free.

You will need to make sure that your long-term care insurance plan is tax-eligible before you can spend the money in your health savings account for these needs. The majority of the time, a health plan will need to have a high deductible in order for it to be eligible for a health savings account.

Once you have determined the eligibility for your long-term care coverage plan, you can use your health savings account checkbook or debit card to begin paying for your monthly or yearly premiums, care-needs or doctor visits. These expenditures will be tax-free.

Rollover

One of the best reasons to try a health savings account is the fact that your contributions rollover each year. This means that by the time you are 65, you could have a great deal of money put away in your health savings account. When you consider that this amount is allowed to gain interest, tax-free, you can have a healthy amount put aside for when you will really need it.

If you do not currently need a health savings account, the ability to have contributions rollover may change your mind. Our health care needs increase with age, and our income stability decreases.

Prescription Drug Coverage

Being able to afford your prescriptions is something that many Americans have not been able to enjoy for many years. A health savings account allows you to pay for your prescriptions, tax-free, as long as they are considered qualified medical expenses. This basically means that your physician will have to prescribe or deem medically necessary your prescriptions for coverage to take affect.

As we mentioned previously, the ability to roll-over your funds and have them accrue interest tax-free, can mean that you will be able to afford even the most expensive prescriptions, without having to cut your pills in half, or avoid taking necessary medications. You will be able to have a sizable reserve in your health savings account, if it is managed correctly.

Now that we have gone over the good points, let's take a look at some of the downsides of a health savings account.

Medicare and HSA's

Once you are enrolled in Medicare, you will no longer be able to make contributions to your health savings account. While you will still be able to use the funds you have put aside, they will never be able to grow, other than through interest earnings.

This can be a downside, particularly if you have not had your HSA for a long period of time.

Your health savings account cannot be used to purchase or pay for a Medigap policy at this point either. However, you may use the funds to pay for health insurance premiums for a policy that is not a Medigap eligible health plan.

Nursing Care

Not all nursing care options are included as "qualified medical expenses." This means that if you prefer to have in-home care, should you need long-term care, you may not be able to use your health savings account funds tax-free. However, you can use the funds to pay for this care, as long as you do not mind giving up the tax-free exemption.

For the most part, the benefits of an HSA as you age far outweigh the downsides. It is important to carefully consider all of your health savings account options before you turn 65, to ensure that you can make the most of this new way to save on health care costs.

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