Health savings accounts could play a crucial and tax-advantaged role for clients’ medical costs in retirement, but holding them until age 65 and beyond poses some complexities as well.
The trifecta of pretax contributions, untaxed accumulation and duty-free withdrawals for qualified medical expenses in the accounts open to those with high-deductible health insurance may pay off extra in retirement — as long as financial advisors and their clients keep Medicare rules in mind and avoid a possible tax hit to non-spouse heirs in their estate plans, experts said. That’s because HSA withdrawals do not affect the calculation of taxes on Social Security benefits and aren’t subject to required minimum distributions like traditional individual retirement accounts.
