print facebook linkedin twitter envelope arrow-left arrow-right chevron-down chevron-left chevron-right chevron-up menu more-horizontal search x
Skip to content
College SavingsEstate and Wealth TransferInsurance/Risk ManagementInvestmentsRetirement/IncomeTaxes   Search

Putnam Investments Putnam Wealth Management

More from Putnam
Blogs
Perspectives Advisor Tech Tips
Sites
Financial Advisors Individual Investors DC Investment Only Institutional Investors
  • College Savings
  • Estate and Wealth Transfer
  • Insurance/Risk Management
  • Investments
  • Retirement/Income
  • Taxes
Little-known strategy provides for IRA-to-HSA transfer

Little-known strategy provides for IRA-to-HSA transfer

March 23, 2017 | Bill Cass, CFP®, CPWA®

Health savings accounts, which provide tax-advantaged savings for qualified health expenses, have grown significantly in recent years. HSAs are available to individuals enrolled in high-deductible health plans. At the end of 2014, the Employee Benefit Research Institute found there were 2.9 million HSA accounts with a total of $5 billion in assets, and nearly 80% of those accounts were opened since 2011.

HSAs are also part of the health-insurance reform proposal being debated on Capitol Hill. The bill provides for expanded use of these accounts.

Contributions to HSAs are made with pretax dollars, and the funds grow tax free. There are limits to contributions, and individuals who are 55 and older may make an additional $1,000 catch-up contribution. Withdrawals are not taxed as long as they are used for qualified medical expenses. Since an HSA does not have a time limit for distribution, the funds can be used for health-care costs in retirement.

Funding an HSA through an IRA transfer

In addition, there is a strategy that investors may use to fund an HSA using an individual retirement account (IRA). But it may be used only once in a lifetime.

A Qualified HSA Funding Distribution allows investors to transfer funds from an IRA to an HSA tax free and penalty free (no 10% early withdrawal penalty). The amount transferred cannot total more than what the investor would be allowed to contribute to an HSA for that year. In 2017, the maximum amount is $7,750 for a 55-year-old with family health coverage who has not made other HSA contributions during the year.

Investors may benefit

Consider a 55-year-old who can choose whether to transfer the maximum amount allowed — $7,750 — from an IRA to an HSA, or leave the money in the IRA. Assume that the individual plans to retire at age 65 and the account has a 6% growth rate.

More details on HSAs can be found on the Internal Revenue Service’s information page. It is important to discuss planning for health-care costs in retirement with a financial advisor. Since investors can only use this funding strategy one time, it is important to consider this transfer in the context of an overall financial plan.


306085

More in: Retirement/Income

Previous

How an LLC can help safeguard assets

How an LLC can help safeguard assets
A tax diversification strategy may help investors cover their bases

Next

A tax diversification strategy may help investors cover their bases

Putnam Investments
Follow us

Any Putnam funds referenced in the above articles are not available for sale outside the United States.

Services provided by Putnam may not be available in all countries or to all investors. This content is not an offer to any investor who is not qualified under local law.

The views and opinions expressed are those of the fund manager above, are subject to change with market conditions, and are not meant as investment advice.

This material is for informational and educational purposes only. It is not a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. It is not intended to address the needs, circumstances, and objectives of any specific investor. Putnam, which earns fees when clients select its products and services, is not offering impartial advice in a fiduciary capacity in providing this sales and marketing material. This information is not meant as tax or legal advice. Investors should consult a professional advisor before making investment and financial decisions and for more information on tax rules and other laws, which are complex and subject to change.

All funds and investment products involve risk, and you can lose money. See the prospectus for details. Any economic and performance information is historical and not indicative of future results.

If you are a U.S. retail investor: Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial representative, call Putnam at 1-888-4-PUTNAM (1-888-478-8626), or click on the prospectus section to view or download a prospectus. Please read the prospectus carefully before investing.

A Member of the Power Financial Corporation Group of Companies™

In the United States, mutual funds are distributed by Putnam Retail Management.

Top