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Ask Bob: Can I Roll My IRA into a Health Savings Account?

Some retirement account owners can take advantage of qualified health funding distribution (QHFD), according to Sarah Brenner, an IRA expert with Ed Slott & Co. That's a tax-free transfer of funds from an IRA to an HSA.

Question

I'd like to take advantage of the one-time-only IRA-to-HSA rollover. Can I do that without having a high deductible health plan at work nor an HSA account set up yet? Anything else I need to think about/consider before I do this rollover if able?

Answer

A qualified health funding distribution (QHFD) is a tax-free transfer of funds from an IRA to an HSA, says Sarah Brenner, an IRA expert with Ed Slott & Co.

These transactions are, however, subject to some restrictions, she says. "They can only be done once in a lifetime and they are restricted to taxable funds in the IRA," says Brenner. "And, a QHFD is also limited to individual's HSA contribution limit for the year."

So, for example, if an individual is age 55 or over and has an HSA-compatible high-deductible plan with family coverage, they could do an $8,000 QHFD from their IRA to their HSA for 2019. "On the other hand, if an individual does not have high-deductible coverage compatible with an HSA, then they would not be eligible to establish an HSA and do a QHFD for the year," says Brenner.

Read more from the IRS: Health Savings Accounts and Other Tax-Favored Health Plans.

Got Questions? Get Answers

Email Robert.Powell@TheStreet.com.

Question

I'd like to take advantage of the one-time-only IRA-to-HSA rollover. Can I do that without having a high deductible health plan at work nor an HSA account set up yet? Anything else I need to think about/consider before I do this rollover if able?

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