How to Use a Health Savings Account (HSA) to pay for Long-Term Care

Everything you need to know about tapping your HSA to pay for long term care insurance premiums

Long term care can be one of the most significant expenses in a person’s life, and more often than not, they are not prepared to handle the considerable costs that are associated with it. Things like nursing homes and assisted living situations are more expensive than ever, and as is usual with health insurance, you can go ahead and expect those costs to keep going up.

Most people know that health savings accounts offer great tax benefits to those looking to save money to spend on future health costs. But very few know that it is actually possible to take money out of your account, tax free, in order to pay for long-term care insurance premiums.

Yes, I’ll say it again. It is possible to make the costs of your LTC insurance tax-deductible by taking advantage of some of the unique regulations that deal with HSAs and long-term care. As long are your premiums are qualified, the money comes out completely tax and penalty-free.

What Kinds of Premiums Are Considered “Qualified?”

Paying long term care insurance in this way is only allowed by the IRS in certain situations. Generally speaking, insurance premiums are not treated as qualified medical expenses by the IRS unless those premiums are for:

1. Qualified long-term care insurance (most LTC plans are qualified)
2. Health care continuation coverage
3. Health care coverage while receiving unemployment compensation
4. Medicare and other coverage for those who are 65 & older

And because all deposits made to HSAs are completely tax deductible, that means that what you pull out to pay for premiums will be as well.

Compare Pricing on the Best HSA Plans Available

Long Term Care: an Expensive Threat to Your Retirement Plans

Here’s the thing about LTC … it can be way more expensive than most people think, sometimes in the range of multiple hundreds of dollars per day. This is because things like retirement homes and assisted-living situations are packed with costs that are almost impossible to foresee without the help of a trained professional.

You’ve worked hard for those retirement funds. The last thing you want to see is all of it gone out the window before you have a chance to use it the way you have dreamed about. One of the ways to mitigate these costs is by taking advantage of the tax-free money you can pull from your health savings account.

While the amount of money you can contribute to an HSA is dependent on what type of policy you have (individual plan vs. family plan), the amount that you can take out for long-term care is based only on your age.

How Much Tax-Free Money You Can Take From Your HSA To Pay LTC Premiums, By Age:

Note: in most cases, these age requirements are based on how old you will be by the end of 2019.

•       40 & Younger: $420
•       41 to 50 Years: $790
•       51 to 60 Years : $1,580
•       61 to 70 Years: $4,220
•       71 Years & Older: $5,270

Talk to a Professional about your HSA

Navigating the ins and outs of your Health Savings Account doesn’t have to be complicated. Talking directly with a Personal Benefits Manager is the easiest way to ensure that your long-term health care plan is as solid as it can be.

Have Questions? Call today and get the fast, friendly advice that you’ve been looking for. Your own personal Benefits Manager is standing by to help you get the most out of your retirement plans.  

Here are some additional articles on Health Savings Accounts: Start Early: Planning for Long-term Care Costs | Why the American Middle Class is Ditching Health Insurance for Good

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