Roll Retirement Money Into a Health Savings Account?
You can make a tax- and penalty-free transfer from an IRA to HSA, but it might not be a good move.
Can I roll over money from an IRA to a health savings account? Is it a good idea?
You can roll over money from an IRA to a health savings account without incurring taxes or penalties, but there are very specific rules and it may not be your best option. The size of the rollover is limited to the maximum HSA contribution for the year minus any HSA contributions you have already made for the year. For 2011, the maximum HSA contribution is $3,050 for self-only coverage or $6,150 for family coverage (plus an extra $1,000 if you’re 55 or older). To qualify for an HSA, you must have a health insurance plan with a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage.
Rolling over funds from an IRA to an HSA can provide a tax-free source of money to cover big medical expenses or help you build up your HSA balance. But if you have enough cash, it’s better to make your full HSA contribution with new money because your contributions are tax-deductible and can be used tax-free for medical expenses. Then max out your IRA contributions for the year, too ($5,000 for 2011, or $6,000 if 50 or older by year-end), so you can make the most of both tax-advantaged accounts without having to raid your retirement fund. If you do want to make the rollover, contact both your IRA and HSA administrator and tell them that you want to make a direct transfer.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For more information about health savings accounts, see What to Know About Health Savings Accounts and Health Savings Account Answers. For more information about IRA limits, see The Basics of Roth IRAs.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
-
Why Pure Storage Stock Is Sailing Higher After Earnings
Pure Storage stock is surging after the data storage firm beat earnings expectations and announced a deal with a major technology company. Here's what you need to know.
By Joey Solitro Published
-
Is Dollar Tree Stock a Buy, Hold or Sell After Earnings?
Dollar Tree stock is higher Wednesday after the retailer beat Q3 earnings expectations and updated its full-year outlook. Here's what Wall Street has to say.
By Joey Solitro Published
-
Credit Report Error? They All Matter
credit & debt Don't dismiss a minor error. It could be the sign of something more serious.
By Kimberly Lankford Published
-
Insurance for a Learning Driver
insurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
By Kimberly Lankford Published
-
Getting Out of an RMD Penalty
retirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
By Kimberly Lankford Published
-
529 Plans Aren’t Just for Kids
529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
By Kimberly Lankford Published
-
When to Transfer Ownership of a Custodial Account
savings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
By Kimberly Lankford Published
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
By Kimberly Lankford Published
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
By Kimberly Lankford Published
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
By Kimberly Lankford Published