Hi Terry, I hope you had an enjoyable Thanksgiving! We were able to get away and visit with our families. It was a lot of driving, but good food and fun.
We’re letting our HSA grow by not taking qualified medical reimbursements as they occur. We’re fortunate that our medical expenses are small and we can pay for them out of pocket. It occurred to me, as I’m starting to wrap up 2014, that in 10 or 20 years, these receipts could be a sizable amount. Do we lose our option to take the tax free reimbursement after a certain amount of time? Can we hold these receipts and make a tax free withdrawal in the distant future? I can’t seem to find an answer in the literature.
Terry Says: Yes, it CAN become a lot of money — and that’s the whole idea of Health Savings Accounts! They can be used to pay for qualified medical expenses — or to GROW for future medical expenses. The money is withdrawn tax-free. (If you take it out before age 65 for non-medical expenses, you pay taxes and a 10% penalty. If you take it out for non-medical expenses after age 65, there is no penalty but you pay ordinary income taxes on the withdrawal). But think of how this money can grow for FUTURE medical expenses that are not covered by Medicare or your supplement. You could even pay LTC insurance premiums with this money! So it’s a great idea to build up the savings in your HSA — and I expect and hope the government will keep its promise regarding the tax-free withdrawal for medical expenses.
To get the absolute facts and answer all your questions, here is the IRS Publication 969 that includes information on HSAs: http://www.irs.gov/publications/p969/ar02.html#en_US_2013_publink1000204081
And here is a link to a more “user-friendly” explanation on the Golden Rule Insurance site: http://www.hsacenter.com/faqs.html
And be sure to encourage others in your company to take advantage of this opportunity!