We’ve written extensively about how much you might end up spending on your own health care in retirement and, as a result, why it’s important to build up your HSA funds so that you can have that reserve of tax-free dollars for such expenses.
But, as a former co-worker of mine used to say, here’s a “super-secret hack” about HSAs that may change the way you spend both in retirement and beforehand: there is no time limit on when you can reimburse yourself from your HSA for medical expenses.
What does this SSH (ahem, super-secret hack!) mean for your retirement savings? It’s simple. Keep reading…
Say you have surgery or, heaven forbid, you are injured and incur larger-than-normal medical expenses. If you have the means — this is the most important point, you have to be able to afford it — then pay your medical bills out of pocket (another SSH: many hospitals are flexible on payment plans if you can show that you’re good for it). This enables you to let your money to keep earning interest or, hopefully, investment returns over time, so that it’s worth a lot more once you hit retirement age. In the meantime, you’ve been saving your receipts — OK, this is really the most important point — so that when you hit 65 years old, you can reimburse yourself for a lifetime of medical bills. Et voila! Thousands of dollars, reimbursed tax-free, to do anything you want with them!
Now, you’re not going to want to drain your HSA for that dream vacay, but there are a lot of expenses in retirement that don’t qualify for HSA funds yet, primarily the biggest post-retirement “medical” expenses, like long-term, assisted-living care. You’re years off from that consideration but, as we all know, years go by fast and it’s good to start planning for the future, like, yesterday.1