Mark Kenney - retirement

A well-built health savings account (HSA) can be a powerful part of your retirement portfolio. But there are things that everyone should know to make sure they are maximizing the benefits and getting the most from these accounts.

With that in mind, we’re not just calling in an expert. We’re calling in Bill Stuart, author of HSAs: The Tax Perfect Retirement Account. He’s one of the world’s leading authorities on this topic, and his understanding of HSAs is truly on another level.

In today’s conversation, we’re talking about the tremendous tax benefits of HSAs, what makes these accounts “triple tax-free,” who can use HSAs (and how to use one if you’re eligible), and some basic strategies you can employ at any stage of life to invest for long-term success.

In this podcast discussion, you’ll learn: 

  • Why the HSA was created in 2004.
  • The differences between HSAs and FSAs–and why the HSA is often much more valuable.
  • What’s covered by an HSA and what might disqualify you from using an HSA.
  • How HSAs work if you’re self-employed.
  • What you need to know about rolling an HSA into an IRA or passing it on to your heirs.

Inspiring Quotes

  • Whether it’s a tax-deferred or a Roth, you’re paying at one end or the other. Tax perfect means you can avoid all the tax friction on a health savings account.” – Bill Stuart
  • “A Blue Cross plan or a Point32 plan isn’t going to cover everything possible but a health savings account list of qualified expenses is broader than what the medical plan covers.” – Bill Stuart
  • “Health savings account, only you, not Uncle Sam, will ever tell you how much you need to take out of your HSA in a given year. It’s based on your need, not a formula by the IRS or anyone else.” – Bill Stuart

Interview Resources

Matthew Peck: Welcome, everyone, to another edition of SHP Financial’s Retirement Roadmap Podcast. I’m your host today, Matthew Peck, and joined by Keith Ellis. And we have an extra special guest today. Today, we’re joined by Bill Stuart, one of the world’s leading experts on health savings accounts. He literally wrote the book, and I’m not even joking. No puns or dad joke necessary. He literally wrote the book titled HSAs: The Tax Perfect Retirement Account. I really look forward to talking about the whole tax-perfect nature of it because that jumps off the page, to say the least. But interestingly enough, here’s what Dan Perrin, the President of the HSA Coalition, had to say about Bill, “If there is a Medicare or HSA question that no one on Capitol Hill or at the White House or at Health and Human Services can answer, I call Bill Stuart.” So, without much further ado, Bill Stuart, thank you and welcome to the podcast.


Keith Ellis: Thanks for joining us.


Bill Stuart: Thanks. Look forward to a good discussion.


Matthew Peck: Well, I think specifically because we were talking a little bit offline, I think there’s a lot of questions about HSAs. I mean, maybe it’s because we’re buried in acronyms. You know, HSAs and IRAs.


Keith Ellis: RMD.


Matthew Peck: RMDs. I mean, it is amazing how many of them are out there. But understanding and making sure that people don’t overlook what really truly could be one of the greatest opportunities to speak to the high cost of healthcare and they’re not going down anytime soon. So, tell us a little bit about your background and how you got into this, and how you became fascinated with it and really looking forward to it.


Bill Stuart: Sure. So, I joined Harvard Pilgrim about 20 years ago. And my job there was to be part of the consumer-driven health revolution. And I didn’t know what that meant when they first approached me. And it was all about health FSAs and health reimbursement arrangements, which had just been brought into law in 2002. And then in 2004, HSAs were launched. So, I came in as sort of an expert that could support the sales force, as well as employers and employees in talking about the federal tax code and how health savings accounts work, and how they could make a difference in people’s lives. So, I did that for 12 years. And then one of my vendor partners hired me away, an administrator of these accounts, and I’ve been working on the administration side ever since.


Matthew Peck: And so, now were you in policy or in government or had you worked for health insurance before Harvard Pilgrim?


Bill Stuart: Yeah. I had actually worked a previous stint at Harvard Pilgrim. So, they knew me and I knew them and I knew the insurance world but the whole idea of these health accounts was brand new to me.


Matthew Peck: And so, okay, so literally, like, “Okay. Bill, come here. Figure it out.”


Bill Stuart: Yeah. That’s pretty much it. “Come in. There’s no script. It’s a newly created job. We think you can handle this. Prove us right.”


Matthew Peck: Yeah. Okay. And then one last question about the history, and then we’ll kind of dig into the actual account itself. So, when it passed in 2004, what was it? I guess, what was the logic and what was the spirit of the law when they passed and created HSAs?


Bill Stuart: Yeah, good question. They actually go back to the mid-90s as part of a previous law. They created this program for small businesses. It was a pilot program where it was a tax-advantaged account and the employer could put some money into it. Fast forward to 2003 and there was a big move in Congress to create a prescription drug program under Medicare, which we now know as Part D and that legislation was formulating through 2003. And some of the people who were involved in that pilot program said, “Let’s also take that program and turbocharge it and make it part of this.” That helped bring a coalition together to pass the prescription drug program. So, at the very end of 2003, suddenly we had health savings accounts that were no longer a pilot program. They were now available to everybody, including people who are buying in the individual market. They now allowed an employer or employee contribution and a lot of other features to it. So, 2004 was when they launched. So, we’re really celebrating the 20th anniversary of these accounts at this point.


Matthew Peck: Interesting.


Keith Ellis: So, tell us a little bit about what an HSA is. And another acronym, sorry, that you did throw out there was FSA. So many people confuse those two things. Maybe you could expand upon the difference between them.


Bill Stuart: Yeah. And that’s one of the great frustrations that we have in the industry, including a lot of us whose companies represent both of those accounts. And they’re both great in the sense they both allow you to pay qualified medical, dental, vision, over-the-counter expenses with pretax dollars. So, the tax savings are equivalent on the two. But there are a lot of limitations that a health FSA has. Health FSA stands for Health Flexible Spending Account, and yet it’s really much less flexible than the health savings account. And then the big area of confusion, I think, number one, is this idea for the health FSA, if you don’t use the money by the end of the year, you forfeit your remaining balance. And employers do have an opportunity to allow you some extension of that but it’s very limited. Essentially, you need to spend your FSA money year-to-year. It’s an annual reimbursement program.


A health savings account, in contrast, think of it as your checking account, as your retirement account. That money continues to grow year after year. There’s no requirement. You deplete the account at the end of the year. There are no limits to how much you can have in the account over time. There are limits to how much you can contribute each year, but that money remains in the account until you spend it whether that is next month or next year or 30, 50 years down the road. So, that’s the number one difference. There are some other differences that are really important. With an FSA, you are locked into an annual election. So, before the beginning of the plan year, you’ve got to kind of figure out how much are we going to spend on dental, vision, and medical. And if you’re right, that’s great. If you overshoot, you can forfeit. If you put in too little money, then you’re going to lose tax savings during the course of the year. With the health savings account, you can change your contribution level as your needs change during the year. So, another flexible piece there.


Also, a couple of other quick things. Health savings accounts, you can earn interest on the money, you can invest it, and you can leave it to an heir. So, when you die, the account doesn’t die. It’s actually a trust. And as your listeners know, because you’ve taught them trust, don’t die, they are transferred to somebody at your instruction at your death. So, they are transferable so you don’t lose the value of a health savings account just because you’re no longer here.


Keith Ellis: Another benefit that I hear quite a bit is the term triple tax-free. Can you elaborate on that maybe a little bit?


Bill Stuart: Yeah. So, the beauty of this is, and your listeners who are used to retirement accounts know, that usually, you’re going to get taxed on either the front end or the back end. And that question is always, do you want to be taxed on the seed or do you want to be taxed on the harvest?


Keith Ellis: That’s a great way to put it.


Bill Stuart: Yeah. With health savings accounts, you don’t face either. So, contributions made to a health savings account are not included in federal taxable income. They’re not included in state taxable income unless you live in California or New Jersey but the other 48 states either have no income tax or they’ve exempted HSA contributions. And you also pay no payroll taxes if you contribute through your employer’s pretax payroll program. So, the money goes in tax-free, it accumulates tax-free. So, the growth, like a typical retirement account, you’re not taxed as that account appreciates over time. And then when it comes time to distribute money, you need to spend it. That will not be taxed as long as you use it to pay qualified expenses. So, tax-free going in, tax-free accumulating, tax-free coming out.


Matthew Peck: So, hence the tax perfect. When the title of your book being tax perfect, that has to meet that definition.


Bill Stuart: That’s right.


Keith Ellis: Sounds good to me.


Bill Stuart: Yeah. You know, we talk about tax-preferred accounts, and that usually means that it’s tax deferred.


Matthew Peck: Right. Yeah. Tax-deferred…


Bill Stuart: Like a tax-deferred 401(k).


Keith Ellis: Like an IRA.


Bill Stuart: But whether it’s a tax-deferred or a Roth, you’re paying at one end or the other. Tax perfect means you can avoid all the tax friction on a health savings account.


Matthew Peck: Yeah. I want to let that resonate a bit. You know, again, all taxes. So, two things, though, that kind of I want to jump back to. You mentioned about qualified expenses. So, is it and I’m sorry to muddy the water again between FSAs and HSAs but is it qualified medical expense the same under both of them? And if not, that’s okay. Let’s just focus on what is a qualified medical expense. How do you pull money out of an HSA if it in fact grows tax-free, tax-perfect, and tax not in the way in, etcetera? But how do I access it and what can I use it for?


Bill Stuart: Yeah, great question. And the answer is, yeah, for your listeners who have used the health FSA for years, it’s the same list. Health savings accounts also pick up some premiums in certain cases but those medical, dental, vision expenses, they are the same. So, a qualified expense is anything that basically prevents, treats, or cures an injury, illness, or a condition. So, it has to be that, it has to be a qualified family member, which means you, your spouse, or a tax dependent, and it has to be incurred on or after the date that you first set up the health savings account. So, it passes those three filters then it is an expense qualified for tax-free distribution.


Matthew Peck: Is there a list? Sorry to interrupt, Bill. Is there a list that people can easily reference? Does the kind of put out a list just for, you know, just people like, “Okay. Ooh, I didn’t realize this was covered like eyeglasses. I don’t know if eyeglasses are or not.” I mean, I have some background in Medicare where they said like, “Okay. Ooh, that qualifies for Medicare but that doesn’t.” Sometimes it was silly like a routine physical. You would get one and I’m not sure if they’ve changed that. I know that was back in the day. So, is there a list that people can reference just so they know, “Okay. Oh, great. This is covered or is not covered.”


Bill Stuart: Yeah. Let me give a resource then let me talk. You’ve opened another box here, which is really important. The IRS puts out a publication called Publication 502. Just google IRS Publication 502. It’s about a 20-page booklet that describes qualified expenses. Also, if you have a health FSA or have a health savings account, your administrator online probably has a quick alphabetical one or two-page list that gives you a really good idea of what’s a qualified expense. But you made a really important point when you talk about what Medicare covers and doesn’t cover, and medical plans for pre-retirees are the same. A Blue Cross plan or a Point32 plan isn’t going to cover everything possible but a health savings account list of qualified expenses is broader than what the medical plan covers. For example, my medical plan doesn’t cover my foot orthotics. Those are a qualified expense because they treat a particular condition. My feet aren’t aligned properly. Acupuncture is often not covered by a medical plan but we assume that’s used for the management of pain. Most people aren’t going to pay somebody to stick needles in for no reason. So, that is another example of an expense.


Chiropractic used to not be covered by insurance. It generally is. But let’s say your insurance covers 12 visits and you need 20 over the course of the year then those last eight you can reimburse out of your health savings account because that is a qualified expense. It’s treating a medical condition. So, it’s much broader, that list of qualified expenses, much broader than medical. Dental is another example. Frequently, adult orthodontics is not covered by a dental plan but that is treating the malalignment of teeth. That is a qualified expense. You can reimburse 100% of that out of your health savings account.


Matthew Peck: That’s fascinating.


Keith Ellis: And that’s one of the biggest expenses I hear. You know, as retirees, folks come in all the time and say, “I had massive dental costs.” So, if you can start putting money away in your HSA to start to save and pay for these expenses later in life, it is a huge advantage in my opinion. You know, the question I have is we’ve talked a lot about HSAs, obviously. We’ve defined what they are, kind of how they work. Who offers them or who can get them and how do you get them?


Bill Stuart: Yeah. Now, you’ve opened another door. Sorry. But I’m sure this will open…


Matthew Peck: I like opening…


Keith Ellis: I like opening these doors because we’re getting a lot of great info and a lot of great tidbits from you.


Bill Stuart: Yeah. And it’s a really important door to open. So, you need to be enrolled in what, unfortunately, under the legislation is called a high deductible health plan. We in the industries call it an HSA-qualified plan because, number one, that sounds a heck of a lot better.


Keith Ellis: Yeah. People with high deductible that run, right?


Matthew Peck: Absolutely.


Bill Stuart: They tend to run for the hills and also because the high deductible health plan has become a very generic term these days. So, your medical plan for 2023 has to have a deductible of at least $1,500 if you cover only yourself and at least $3,000 if you cover one other family member. So, a family plan, 3,000. Individual, 1,500. Also, everything except preventive care must be applied to that deductible. So, if you’ve got a plan that has a $2,000 deductible but it has a $25 co-pay for a sick visit at the doctor, that is not a qualified plan. Most plans are going to say HSA in their name, the Best Buy HSA 3000 plan. But be sure to ask your insurer or your employer if your plan is an HSA-qualified plan. If it is, then you need to meet two other requirements in order to open and fund a health savings account. You can’t be someone else’s tax dependent. Most of our listeners, that’s probably not a problem unless you’re a ten-year-old that really gets into finance and wants to learn from the SHP podcast. But generally, that’s going to be fine and you can’t have any other disqualifying coverage.


The two biggest areas we’ve run into here are, number one, a general health FSA is disqualifying. So, if you or your spouse is enrolled in a general health FSA, you cannot set up a health savings account. And number two is Medicare. So, if you are a working senior and you are enrolled in your company’s HSA-qualified plan and meet all the other requirements, but you also took Part A at age 65 or when you started collecting Social Security benefits thereafter and automatically enrolled in Part A, you can no longer fund a health savings account. But absent that, you are enrolled in the right plan. You can continue to make contributions forever.


Matthew Peck: And so, and walk through that part. So, you enroll because I’m happy enough. This is, you know, very important here too. Whew. Because I have an HSA.


Keith Ellis: As do I.


Matthew Peck: I think Keith has an HSA. So, he and I have an HSA but just for our listeners, what I recall is that you pay your premium. You know, I continue to pay my premium to whomever, you know, the health insurance is but then separately, I go on to a separate custodian to then make the deposits in and then another almost like a third custodian then manages the assets because you can invest the assets. Correct? So, I mean, I’m not sure if that’s how it was before. If they’ve streamline the process a little bit, but it’s almost like you pay a premium and you do a deposit or a contribution, forgive me, and they’re separate.


Bill Stuart: Yeah. So, when you’re working through your employer, your employer is going to deduct from your pay, your portion of the premium. And generally, when the employer is offering multiple plans, the premium for the HSA-qualified plan is less. So, you get an immediate break right there. You know, it may be $200 per pay period versus $300 being taken out for your premium. And then, yes, separately, there is a contribution that you can make to the HSA, usually done through pretax payroll contributions. So, you just tell your employer, take $200 per pay period out of my paycheck or I want to put in the maximum for a family, which for me is 7,750 this year. Divide that by 24 pay periods and I’m putting in almost 300 plus dollars per pay period. The employer’s collecting that money and then sending that on my behalf directly to my HSA administrator plus any money the employer’s putting in. So, the employer is allowed to put in a contribution as well. So, that money is going into my health savings account, which is managed typically by someone other than my insurer.


So, there are a number of HSA administrators out there. There are thousands of them. Some of the big names are HSA Bank, HealthEquity, Fidelity, Optum. Those are names you might see that your employer’s working with. And then you log on to your account there and you can see your balance. You’re going to get a debit card where you can pay your expenses. There’s going to be some kind of investment account associated with most health savings accounts. Sometimes it’ll be a menu of mutual funds, a couple of dozen mutual funds. Sometimes it’ll be a brokerage account where you can invest in any stock, any mutual fund. So, that’s the way it works. So, you’ve got the medical insurance and then separately, you have this financial account.


Keith Ellis: Your investment account. Correct.


Matthew Peck: I see. Okay. So, just again, for our listeners, and maybe that’s where the differences were because being self-employed, you know, so it’s obviously different. If it’s offered through your employer, it’s almost being, you know, all taken care of for you to a certain extent, right? Whereas obviously, if you’re self-employed, you do have to kind of maybe take an extra step because you’re both the employee as well as the employer to make sure you get that second contribution in. Yeah. So, slightly different steps or things you need to do but whether you’re employee or self-employed, obviously, we wouldn’t be doing this podcast if we didn’t think you should be looking into it. But, Keith, before you have another question, I do want to go back to because specifically for a lot of our listeners are on Medicare, can you walk through?


So, you had mentioned that people that are on Medicare, obviously, can’t enroll. They can’t continue to contribute into it. But let’s say you have an HSA and you’re going on to Medicare and now I know the HSA is now stagnant and you can’t contribute to anything more but how can you use your HSA? How can you apply your money in HSA to Medicare expenses? I’ve heard it’s just Medicare Advantage. Yes. So, try to straighten this out there as to what happens when you have $50,000 in your HSA and now you hit Medicare.


Bill Stuart: Yeah. The beauty is that you’ve got a lot of options here. So, as we mentioned, once you are enrolled in any part of Medicare, you can no longer contribute. But you have the account, you have the balance, it’s still yours. So, what can you spend it on? Well, Medicare Part B is going to have premiums and there are $160 or so per month or higher this year. They typically go up every year. That can be paid out of a health savings account. If you’re collecting Social Security, Part B premium is going to be deducted right from your Social Security check. So, you can write yourself a check for $160 every month or $161.20 or whatever it is. You can write yourself a check. You can transfer money into your personal account every month if you want to do that. That is a tax-free distribution from your health savings account. Part D, the prescription drug is also going to have a premium. That also is reimbursable tax-free out of your health savings account.


If you are on Medicare Advantage and that has a premium, many plans don’t. Some do have a small premium. That is a tax-free distribution. If you are on traditional Medicare and have a Medicare supplement plan, MedSup, Medex, that premium is not a qualified expense. So, you would not be able to take money out of your HSA for that without paying taxes on it. But in addition to the premiums, Medicare has deductibles, it has co-pays, it has coinsurance, it has items that it doesn’t cover. We talked about dental. I think that’s a big shock for people going into retirement. They always had a dental plan before. They had a vision plan and suddenly they realized that most of those services, unless is a medical component, is not covered by Medicare. So, they suddenly have that big bill that you mentioned a minute ago for a bridge or a crown or a root canal. They can reimburse that out of their health savings account. And in most cases, it’s as easy as taking the debit card associated with the health savings account and handing it to the doctor, the dentist, the vision center. The HSA debit card is either a Mastercard or a Visa. It works on any system so the doctor doesn’t need to have a special health savings account swipe box. It just goes through the Visa or Mastercard system and the money is just taken out of your HSA rather than your personal checking account.


Keith Ellis: That’s fantastic. You know, I know you said we’re going on close to the 20-year anniversary of HSAs. One of my question was, how big are HSAs? Like, does every company offer them? Well, are they becoming more and more popular? Kind of give a little bit there, if you don’t mind.


Bill Stuart: Yeah. Not every company does offer them but most of them do at this point. Some smaller companies might not but most companies with 100 or more employees that are offering two or three plans, typically an HSA option is one of those plans. So, they are widely available and that availability is growing every year. There are about 37 million of these accounts out there with total assets of more than $100 billion. So, for your listeners who are saying, “Oh, this is a new concept to me. I want to know whether it’s a little bit risky getting into something new. They’ve been around 20 years.


Keith Ellis: There’s a lot of adoption.


Bill Stuart: 37 million people have gone on to this. There’s $100 billion in there. Those numbers grow by about 8% to 12% annually, both the number of accounts and the balances. So, they are a tried and true program. If you do the simple math and look at 37 million divided into 100 billion plus, the average account balance is $3,000 mathematically but that paints a very distorted picture. About half the accounts have $500 or less in them. And what that typically means is people are funding them to the level of their need so they know they’re going to need a couple of thousand dollars this year. They put in a couple of thousand. If they suddenly need more, they can put in more. But they’re using it much like the old health FSA where the money goes in and the money comes out. There are about 13% of those 37 million accounts that have balances of more than $2,000. Only about 7% of account owners are investing right now. Their average balance is about $16,000.


So, there are a handful of people who are using this as a retirement account, as a savings account. They’re maximizing what they put in. They’re minimizing what they take out. They’re building those balances over time, through contributions, through investments. And they’re really seeing this as another retirement account just for those medical expenses. You know, fidelity every year does a survey of what it’s going to cost for medical expenses and retirement. And for a 65-year-old couple retiring this year, they can expect to pay $315,000 through the remainder of their life, which is roughly 18 years for men and 20 years for women. So, $315,000. And that’s the Medicare premiums, that’s the Medicare cost sharing, the components that Medicare is not covering. It does not cover long-term care, which is all another can of worms.


Matthew Peck: Well, yeah, it’s a whole different ball of wax.


Bill Stuart: Yeah, but just the medical expenses, roughly $315,000 health savings account is a way of offsetting those where if you put that same money into a tax-deferred 401(k), you’d have roughly the same amount of money but every dollar taken out of the for 401(k) is going to be included in your taxable income. HSA, that money’s coming out tax-free. So, the same contribution 20, 30 years before is going to buy more in retirement because you don’t have the tax friction at the end of the health savings account.


Matthew Peck: So, it’s interesting, though. So, only 7% of account owners are actually setting it aside to build and to grow. I mean, I know we’re generalizing here, but only 7%. So, I guess that’s part of your advice to our listeners there is to say, hey, you know, really try to get your contributions as high as possible and your distributions as low as possible with an eye toward retirement.


Keith Ellis: That was going to be my question is, is it like maybe a lack of education of how to use these things?


Bill Stuart: Absolutely, lack of education. And it’s like anything else in the financial world. And you at SHP deal with this every day. The people who understand things, who are armed with knowledge end up in a much better situation financially. And that’s all about what you’re teaching them. That’s separating them from the average person they’re walking past on the street. And it’s the same way with health savings accounts. It’s all about education and understanding that these are so much more than the health FSA annual reimbursement account. And I don’t say that to knock health FSAs because they are a great account for current expenses and many employers will offer them and not a health savings account and they’re a great way to save money. But understand, if you have a health savings account, you’ve now got a financial Ferrari in the garage and you can use it in so many more ways than you can an annual reimbursement plan.


So, think about where do I put my next dollar. Did I want to invest long-term? It may well be that that belongs in a health savings account rather than a retirement account. I wouldn’t tell people that’s a universal dictum, but it’s certainly something to consider as they look at their overall long-term and retirement planning strategy. HSAs can fit in here very nicely because they are a long-term account. There is no use it or lose it. There is no requirement they spend that money at any particular time. There is no limit on how much they can accumulate in that account and there are no required minimum distributions once they reach that magic age. So, they don’t have to worry about, “Oh my God, I’ve got to take $10,000 out this year. The government tells me I don’t have the expenses, but I need to take it out.” No. Health savings account, only you, not Uncle Sam, will ever tell you how much you need to take out of your HSA in a given year. It’s based on your need, not a formula by the IRS or anyone else.


Matthew Peck: So, it certainly bears repeating. No RMDs on HSAs. But to go back to one, you know, a couple of last things before we wrap up. We talked about how within IRA or so let’s say someone is behind the eight ball, says this is great. I love to get my HSA as going as possible, sort of accelerate it. There is a rule that you can roll an IRA into it or what are those rules of consolidating or is it possible?


Bill Stuart: Yeah. That’s a really good strategy to consider. If you are, particularly later in life, you suddenly at age 55 have an HSA for the first time and you’re thinking, how am I going to get enough money in there in the 10 or 12 years before I retire? One of the options you have is a once-per-lifetime rollover from an IRA into a health savings account. Now, it’s a great option because in many cases, most cases that IRA is going to be tax-deferred and you can take that money out of a taxable stream and put it into a non-tax stream. That’s the beauty. There are a couple of restrictions around it. First off, it’s not unlimited. You can put in no more than your annual contribution limit. So, in 2023, the most you can put into a health savings account if you cover only yourself is $3,850. If you have a family plan, you cover at least one other person. The most you can put in is $7,750. In addition, there’s a $1,000 catch-up contribution. So, in my case, in my family it’s $7,750 plus I’ve got a $1,000 catch-up. My wife has a $1,000 catch-up. So, $9,750 total that we could put in. So, you can’t put in, you can’t roll over from an IRA any more than your contribution limit for the year. Once you do that, you have to remain HSA eligible for 12 months. If you don’t, then the whole thing is treated as a premature distribution from an IRA and potentially subject to taxes and penalties.


Matthew Peck: So, someone should be real careful specifically getting close to Medicare. So, thinking like, “Oh, I’m 64. It should be great,” but I mean, although HSAs are used very nicely towards Medicare expenses, they’re not HSA. Medicare plans are not themselves HSA eligible.


Bill Stuart: That is correct. So, yeah, once you’re getting close to that magic 65 age, you better rethink that strategy. Unless you work for a large company, you are going to continue on the company plan. You are not collecting Social Security benefits, therefore you’re not enrolled in any part of Medicare. You can remain HSA eligible but otherwise, just be very careful of that looming Medicare enrollment because that will disqualify you. And if you wait until after you’re 65 to enroll in Medicare and eventually you do, that Medicare Part A coverage is going to go retroactive six months. So, if you think that your Medicare starting in November, that part A is going to go retroactive to May so you’ve lost six months of HSA eligibility and contributions you thought you might have had.


Matthew Peck: Yeah. So, certainly, be careful. Sorry to interrupt, Bill. Certainly, be careful there. And so, my last question is not to end on such a morbid topic but walk us through what does happen at death. So, you do have an HSA. You haven’t used it for whatever expenses may have been at that point in time. So, now you get hit by the proverbial bus. What happens?


Bill Stuart: Yeah. The answer is the money is not lost. I think that’s the first comfort here. The money is not lost because it is in a trust that is separate from you and trusts don’t die. You name a beneficiary during your lifetime. If the beneficiary is your spouse, that money passes to your spouse tax-free so it’ll roll over from your HSA into an HSA that your spouse establishes. Your spouse may already have one, in which case the money can go over easily. If your spouse doesn’t have one, your spouse can open an account even if he or she is not eligible. So, you’re 75, your spouse is 70, you’re both on Medicare or you die. Your spouse can open an HSA to receive that money, and then once it’s in your spouse’s account, he or she can use it for him or herself and any remaining tax dependents. If you name anybody except your spouse, you want it shared equally by your kids, your dog, your church, you can name anybody else as a beneficiary. If it’s not a spouse, then upon your death it will cease being a health savings account. The money, the investments will be liquidated. The money will go to the recipient that you designate, that beneficiary and that beneficiary could owe taxes on.


So, if it’s your kids, they’re going to pay taxes. If it’s your church, they’re not. So, it loses its tax protection. It loses that ability to continue to reimburse expenses tax-free. On the other hand, if I’m giving it to my kids, they’re happy to get less money and have it spent on anything they want because the last thing they’re thinking about is their medical expenses 40 years from now.


Matthew Peck: Absolutely. Yeah. So, that’s my future self’s problem. That’s not my problem.


Bill Stuart: That’s right.


Matthew Peck: And so, where can listeners learn more about HSAs?


Bill Stuart: Actually, the IRS has some good information on its website or a simple Google search of health savings accounts will give you some really good information. I mentioned IRS Publication 502 earlier. That’s a good list and description of the eligible expenses. IRS puts out another really good publication called Publication 969. Again, IRS Publication 969. It’s available if you google and it is about a six or eight-page summary of all the rules of health savings accounts. And also, I’ll shamelessly endorse my book once again.


Matthew Peck: Please do. Please do.


Bill Stuart: Yeah. HSAs: The Tax Perfect Retirement Account, which is available on Amazon. I’m the author, William G. Stuart. S-T-U-A-R-T. You can also follow me on LinkedIn. I write a couple of articles every week on health savings accounts and that’s just William-Stuart-HSA-Guru on LinkedIn. So, William Stuart HSA Guru will get you to my account. Follow me and you’ll see me regularly posting my own information as well as posting other people’s information on health savings accounts.


Matthew Peck: Thank you so much, Bill.


Keith Ellis: Yeah, thanks. Really appreciate it.


Matthew Peck: I mean, a complete wealth of knowledge in this particular area. And it’s funny, Keith, I often talk about how when the government does sort of pass laws or create these accounts or whether it’s the Secure Act 2.0 or any new sort of innovation that is coming out from the American government, it’s not necessarily their obligation. So, they’ve done their obligation, which is to pass the law, which is to create the account, which is to give people that tool.


Keith Ellis: The opportunity, yeah.


Matthew Peck: But it’s not their obligation for them to take up on it. Do you see what I mean? And so, this is our job. And then, Bill, that’s why I thank you so much and this is the job of a financial planner and an advisor is to make sure that you are using every tool in the toolbox on behalf of your client. And when the people walking down the street don’t have that knowledge or don’t have that good advisor that’s making sure that they’re taking every advantage, then they’re the ones that fall behind. And so, Bill, again, what you’ve brought to the podcast today just is in that same spirit. I mean, yes, obviously we’re trying to keep lights on and put food on the table. So, yes, this is a for-profit company but we also know that good information begets, you know, better information, just a better situation for our clients, their kids long term. And again, I can’t thank you enough for coming on. So, Bill Stuart, HSAs: The Tax Perfect Retirement Account, definitely check it out on Amazon. And thanks again.


Bill Stuart: My pleasure. Thank you.

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