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Smart Strategies for Health Savings Accounts

With no deadline to use your HSA money, think of your account as a retirement fund for medical expenses.

Is there a deadline by which I have to use the money in my health savings account for medical expenses?

No. Unlike flexible spending accounts, which require you to use the money by the end of the year (or March 15 of the following year), HSAs have no deadline; you can use the money for medical expenses in any year. And because you can no longer make new HSA contributions after you sign up for Medicare, letting the money grow tax-free and using it for later expenses is a smart strategy.

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“We tell older consumers to think of their HSA as a retirement fund for medical expenses,” says Keith Mendonsa, consumer specialist with eHealthInsurance.com. If you have the extra cash, you can pay for current medical expenses from your own pocket and let the money in the HSA grow. You can use the money from the account tax-free at any age for medical expenses -- for example, deductibles and co-payments, premiums for Medicare Part D and Medicare Advantage (but not medigap), and a portion of long-term-care insurance premiums. You can even use the cash in the account to reimburse yourself for the money that Social Security withholds to pay Medicare Part B premiums.

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You can use HSA money for any eligible medical expenses you paid on your own after you opened the account (but you can’t use HSA money for medical expenses you incurred before you established the account). “A little-known fact of HSAs is that you can always reimburse yourself retroactively for any expense you paid out of your pocket,” says Will Applegate, vice-president of HSA business development for Fidelity, which provides HSAs for many employers that also offer Fidelity 401(k)s. Not only can you make the withdrawals without penalties, but you won’t have to pay taxes on the money, either. That means you can use an HSA as an extra stash of tax-free money for emergencies.

Keep records of past medical bills to document reimbursement from your HSA. Some plans provide tools that help you keep track of eligible expenses. Cigna’s expense tracker lets you upload your medical receipts and mark whether you paid the bill from personal funds or from your HSA.

For more information about health savings accounts, see FAQs About Health Savings Accounts.

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