Financial Milestone Age 55: HSA Catch-Up Contributions

August 13, 2023

I hope this email finds you in good health and high spirits. As you approach the significant milestone of turning 55, I wanted to bring your attention to a valuable opportunity that can help boost your financial well-being–the Health Savings Account (HSA) Catch-Up Contribution.

At age 55, individuals are eligible to make additional contributions to their HSA, allowing them to save even more for future healthcare expenses. This catch-up provision provides a unique chance to take control of your financial future and may help ensure you have the necessary funds to cover medical costs during retirement.

HSAs are designed to be used in conjunction with a high-deductible health plan (HDHP). If you purchase an HSA as part of your company's benefits package, contributions are pre tax, and withdrawals for qualified medical expenses are not taxable. Funds in HSAs can also be invested after your account balance reaches a certain limit, which the HSA administrator determines and which will vary.

Remember that if you spend your HSA funds on non-qualified expenses before age 65, you may be required to pay ordinary income tax and a 20% penalty. After age 65, you may be required to pay ordinary income tax on HSA funds used for non-qualified expenses. HSA contributions are exempt from federal income tax but are not exempt from state tax in certain states.

To make the most of this opportunity, we could review your current HSA contributions and consider whether it would be beneficial to increase your contributions to take advantage of the catch-up provision.

If you have any questions about your HSA contributions, feel free to reach out to me, and we can discuss.

Once you start Medicare, you can no longer contribute pretax dollars to your health savings account (HSA). If you were to withdraw money from your HSA for a nonmedical reason, that money would become taxable income, and you would face an additional 20% penalty. After age 65, you can take money out without the 20% penalty, but it would still become taxable income.