Pub. 8 2018 Issue 3

16 www.azbankers.org HSA Savings for Long-Term Care in Retirement By Steve Christenson, Executive Vice President, Ascensus® W HEN RECENTLY ON VACATION, I ENTERED INTO A DISCUSSION WITH ANOTHER COUPLE AND WE SHARED OUR CAREER BACKGROUNDS. THE CONVERSATION LED TO HOW HEALTH SAVINGS ACCOUNTS (HSAS) CAN BE A KEY TOOL FOR RETIREMENT SPENDING. AS WE ALL SAW OURSELVES MOVING CLOSER TO RETIREMENT, THE DISCUSSION AND QUESTIONS GREW INTO THE TOPIC OF USING ACCUMULATED HSA ASSETS FOR LONG TERM CARE EXPENSES. Using HSA Savings in Retirement The cost of health care for a married couple during retirement is estimated to range from $250,000 to $400,000. HSA owners can use their HSA savings for qualified medical expenses at any age, but let’s consider a few ways to use these assets in retirement (after turning age 65) and how they are taxed. • Qualified medical expenses—tax-exempt • Medicare premiums—tax-exempt • Qualified long-term care insurance premiums and qualified long-term care services—tax-exempt • Qualified medical expenses that occurred previously and were paid out of pocket (but after the HSA was estab- lished)—tax-exempt • Supplemental income for nonqualified expenses, such as home expenses, travel, or gifts for friends and family—taxed as ordi- nary income, but no 20 percent penalty tax after age 65 Qualified Long-Term Care One concern many of us will have during retirement is long-term care. HSA assets can be used for qualified long-term care insurance premiums and qualified long-term care services.