Budgeting to pay for health care is important for any retiree but especially for people who retire before being eligible for Medicare at age 65. With luck and diligent care of your fitness throughout your working years, your need for medical care will be lower when you’re a young retiree, but that doesn’t keep you from having to pay the health insurance premiums.

One way to help is with a health savings account, also known as HSA or medical IRA. If you’re interested in the details, check out IRS Notice 2008-59 at www.IRS.gov, but essentially an HSA is like an IRA in which you can deposit pre-tax money to pay for medical expenses. HSAs are just now becoming popular, and your employer may not offer HSA as an option at work yet. (Don’t confuse HSAs with your employer’s Flexible Spending Account or FSA.)

You’re eligible to make deposits into your HSA if you have a high-deductible health insurance policy. Contributions are capped for each tax year, just like a regular IRA, but they are not taxable when you make withdrawals to pay for medical expenses. You have no minimum withdrawal requirements for the money in your HSA, so it can stay invested in the account until you need it, even past age 70½.

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