How Do I Move Funds From a Traditional IRA into an HSA?
If you’re now on Medicare but had opened a health savings account (HSA) when still working and were covered by a high-deductible health insurance policy, are you able to transfer funds from a traditional IRA to a health savings account now? How much can be transferred?
Kiplinger, in its recent article, “Transferring IRA Money to a Health Savings Account,” explains that you can only transfer money from an IRA to an HSA, if you’re eligible to make new HSA contributions. A person who’s enrolled in Medicare can no longer contribute to an HSA. However, the money in the account can be used tax-free for eligible medical expenses. Now that you’re over 65, these expenses include Medicare Parts B and D, as well as Medicare Advantage premiums.
Remember that you are required to transfer the money directly from the IRA to the HSA for the rollover to be tax-free. Ask your HSA administrator about how to do this. You can only roll money over from an IRA to an HSA once in your lifetime.
A rollover lets you convert tax-deferred dollars into tax-free money, if you use the withdrawals from the HSA for medical expenses. However, you’ll get a better tax benefit, if you can contribute new money to the HSA instead.
That’s how you can keep more money growing tax-deferred in the IRA and get a tax deduction for the new HSA contribution.
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Jeffrey Bellomo, Esq.