Funding Long Term Care Insurance with your HSA account

Many people assume they cannot afford long-term care insurance to protect themselves and their families from the financial, emotional and physical sacrifices needed to provide long-term care for a loved one. Yet, 46 percent of older adults could not estimate the potential monthly cost of a long-term care policy, according to a consumer survey.

In reality, long-term care premiums are a reasonably small expense when compared to paying for care out of pocket, as these costs can run as high as $100,000 a year. Despite these facts, finding ways to pay for premiums can often be a genuine challenge for many families seeking coverage. Fortunately, there are several funding options available to help people on tight budgets pay for long-term care insurance, including Health Savings Accounts (HSA).

An HSA is a tax-advantaged medical savings account accessible to taxpayers in the U.S. who are enrolled in a high-deductible health plan. A high-deductible health plan has a yearly deductible of at least $1,200 for individuals and $2,400 for families.

Using an HSA to pay for insurance can be a smart alternative for people who can’t deduct their premiums as a self-employed person or as reimbursed medical expenses on a federal tax return. Qualified long-term care insurance premiums are considered a medical expense, meaning people can take money from their HSA to cover these costs.

There are numerous tax advantages associated with HSAs such as tax-free benefits on interest and other earnings on account assets. Contributions made by an account holder’s employer may be excluded from their gross income in addition to numerous other attractive tax incentives.

Although HSAs can be a practical way to pay for long-term care insurance, not everyone qualifies and even those who do can’t always use the account to pay for premiums. Consumers should speak to their financial advisors about whether or not an HSA is an option for them.

As families across the nation begin to organize their households for fall, it’s important for everyone to have a retirement plan in place that secures their financial future. A long-term care policy can help and with HSAs, even consumers on tight budgets do not have to be without protection.

Contact Lucy Grosz, CLTC today at 614-889-0934 or lucy@altavistaben.com to learn more.