Using Retirement Money for Dental Implants (401K & IRA)

Dental implants are a popular option for people who are missing teeth. However, they can be expensive, and many people struggle to find ways to afford them.

Retirement accounts, such as 401(k)s and IRAs, are designed to help people save for their golden years. However, you can use them for other purposes.  

While using retirement accounts to pay for dental implants may be a viable option for some people, it is vital to understand the rules and regulations.

You might incur penalties and taxes, so it is essential to recognize the pitfalls, identify alternatives, and consult a financial advisor before making any decisions.

Using 401K for Dental Implants

Your 401(k) can be a source of funds for dental implants. However, using this specific retirement account for treatment is not always the best option. It’s crucial to weigh the pros and cons of loans and hardship withdrawals before deciding.

401K Hardship Withdrawals

One option for using a 401(k) to pay for dental implants is to take a hardship withdrawal. A hardship withdrawal allows an individual to take money from their 401(k) before the age of 59 ½ without incurring a 10% penalty.

To qualify for a hardship withdrawal, an individual must demonstrate an “immediate and heavy financial need” that cannot be met through other means. Examples include medical expenses for the employee, the employee’s spouse, dependents, or beneficiaries.

Government grants for dental implants do not become more feasible during financial hardship, but your ability to qualify for other programs might skyrocket. Take advantage of every possible benefit earmarked for low-income families instead of raiding your 401(k) – if your difficulties help you to qualify.

It’s important to note that taking a hardship withdrawal can have negative short and long-term consequences.

  • Short-Term: you will owe income taxes in the year you withdraw funds
  • Long-Term: you hamper the compounding of investment returns over time

401K Loans

Another option for using a 401(k) to pay for dental implants is to take out a loan from the account. A 401(k) loan allows an individual to borrow up to 50% of their vested balance, up to a maximum of $50,000. You must repay the loan within five years, and the interest rate is typically lower than other types of loans.

One advantage of a 401K loan is that the interest paid goes back into the individual’s retirement account. However, one major drawback should make you pause.

  1. If you leave your job before repaying the loan, you must pay it back within 60 days.
  2. If you do not repay the loan, it is considered a distribution and is subject to income tax and a 10% early withdrawal penalty.

In-house financing programs for dental implants will charge higher interest than a 401(k) loan, but without the draconian tax consequences should your employment end sooner than expected. If your job is shaky, borrowing money from a private lender might be the safer alternative.

Using IRA for Dental Implants

Patients can use a Traditional or Roth Individual Retirement Account (IRA) to pay for dental implants. You can take the money directly and endure immediate tax consequences. Or you can transfer the funds into a Health Savings Account to avoid this pitfall.

IRA Distributions

You can use Individual Retirement Accounts (IRAs) to pay for dental implants, but there are tax implications to consider. If you are under 59 ½ and withdraw money from your IRA, you will be subject to a 10% early withdrawal penalty in addition to income tax on the distribution.

However, if you are over 59 ½, you can withdraw money from your IRA without penalty, but you will still have to pay income tax on the distribution.

  • Dental implants for seniors paid by Medicare might be less expensive when your Advantage Plan includes oral care benefits. Find a prosthodontist participating in-network with your plan and get a cost estimate to avoid over-withdrawing money from your IRA.
  • Dental implants are tax-deductible medical expenses, perhaps offsetting the IRA distribution drawback. However, careful planning is necessary to maximize the possible savings, as you must exceed two thresholds.
    • Itemized deductions must exceed the standard deduction
    • Medical and Dental expenses must exceed 7.5% of Adjusted Gross Income

IRA Transfers to HSA

Another option for using retirement accounts to pay for dental implants is to transfer funds from an IRA to a Health Savings Account (HSA). HSAs are tax-advantaged accounts that you can use to pay for qualified medical expenses.

You can use your HSA to pay for dental implants, avoiding the 10% penalty and additional income taxes.  

  • To be eligible to contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP).
  • As of the publication dates, the maximum contribution limit for an HSA is $3,750 for individuals and $7,500 for families.

You must complete a trustee-to-trustee transfer to move funds from an IRA to an HSA. The funds will be shifted directly from your IRA custodian to your HSA custodian without you ever taking possession of the money.

There are no taxes or penalties for this type of transfer, but there are some restrictions. The amount you can move from your IRA to your HSA is limited to the annual HSA contribution limit minus any contributions you have already made for the year.