HSA in Retirement - Tax Advantage?

[Ynari]

I retired early this year at age 60. I have a non-employer HSA account that I was funding with after tax wage earnings and then claiming the credit on my taxes. Now that I’m retired, I’m taking taxable distributions from my retirement account.
 
Is there any advantage in still funding the HSA?  Seems the answer would be no, since I’m paying taxes on the IRA distribution only to turn around and claim a tax credit on my tax return. Am I missing something?  Seems like it should be more complicated than that, since nothing Involving the tax code is ever simple.
 
Thanks for your insight.

[firefamily]

Can you grow your HSA balance tax deferred until used? If so, is that amount of growth worth your effort?

[LaDeeDa]

If you have a high deductible health plan and are eligible to contribute to an HSA, it's hard to screw up by making that contribution.  Money that is contributed to an HSA that is used to pay medical expenses will NOT be taxed upon withdrawal.  So even if you must fund the HSA contribution via an IRA withdrawal and pay the associated taxes, you can claim the tax credit and get the taxes back!  This is essentially the same thing as transferring money from your IRA to your HSA where it will not be taxed upon withdrawal.  How can that not be a good thing … everyone will eventually have medical expenses.  Why not pay them with "before tax dollars".

IMHO, HSAs are the most underutilized financial account out there!  Even if you want to use the HSA money for something other than medical expenses, you just pay the taxes upon withdrawal (just like an IRA).  So if you are eligible to contribute to an HSA … DO IT!

[Ynari]

By taking the money as a taxable distribution from my IRA to fund the HSA, they are not “before tax dollars”. If it’s a wash, pay the taxes and then get a credit, why bother? I don’t have a very large balance in the HSA, so I’m confident the entire amount will eventually be used on medical expenses.
 
You are correct that the HSA is a great thing. Had I known years ago what I do now, I would have fully funded it each year and not used any of it.