A health savings account can help people get tax-free money for medical expenses that aren\u2019t part of their health plans. It covers payments for vision, dental, medical, and prescription items. You can opt to pay for it through an employer or through self-contributions.<\/p>\n\n\n\n
To get a health savings account, you first need to have a high-deductible health plan. It means that you must already be paying for a taxed health plan before qualifying for an HSA. The two usually go together. There are also a few other requirements:<\/p>\n\n\n\n
Both an employee and employer can contribute to the account at any time. There is a cap of $3,600 for an individual and $7,200 for a family. Those above 55 years old have the limits increased by $1,000.<\/p>\n\n\n\n
There are two ways to get a health savings plan. You either have your employee sponsor it and make regular deductions to your salary each month. The alternative is to seek one yourself through a financial institution. As long as you meet that institution\u2019s requirements, you can enroll. If you opt to get a family plan, members of the family can contribute to that HSA.<\/p>\n\n\n\n
An HSA plan can help you save money and pay for health care. As it is an option available for those with high-deductible health plans, it may be good to consider because of the following benefits:<\/p>\n\n\n\n
The HSA pays for fees your other plan doesn\u2019t cover. They can pay for eyeglasses, dental care, and the like. All this is tax-free. However, you will have to pay taxes if you use it for expenses that aren\u2019t part of the plan.<\/p>\n\n\n\n
While the HSA has penalties when it\u2019s an ineligible purchase, this penalty no longer applies to people over 65. It will continue to be tax-free even if you take the money out for other reasons. It can be an alternative retirement savings plan or a supplement.<\/p>\n\n\n\n
All interest earned by the HAS is tax-free. The funds also don\u2019t expire and will continue to roll over the following year if you don\u2019t use them.<\/p>\n\n\n\n
For example, your tax bracket is at 15%, and you\u2019re maximizing contributions at $3,600. It means you\u2019re saving 15% or $540 in taxes. The savings become even more significant as your tax bracket increases.<\/p>\n\n\n\n
If you can maintain a certain balance in your plan, you can invest part of the money. You can place them in stocks, bonds, and other traditional investments.<\/p>\n\n\n\n
You decide when to use the money you have in the HSA. It will not leave you even if you change jobs or your HDHP. It will stay in your ownership.<\/p>\n\n\n\n
There are some disadvantages to the HSA you also need to consider. That way, you understand what\u2019s involved if you decide to pursue it.<\/p>\n\n\n\n
The HSA will put you under pressure when you need to spend the money. You\u2019ll have to debate on whether saving or spending it might be a better option. There\u2019s also the pressure of paying for it each month which not many can do consistently.<\/p>\n\n\n\n
Medical treatment can vary, and the quality can also differ. You may not know how much you\u2019re paying until you\u2019re already undergoing treatment. Because of that, it may be hard to use the HSA in certain situations.<\/p>\n\n\n\n
Until you are over 65, you can only use the HSA money for eligible health care services. You\u2019re limiting a portion of your money to health care which can be unpredictable. You\u2019ll never know how much you need because illnesses can vary.<\/p>\n\n\n\n
HSA can provide a unique advantage, as they are tax-free savings and investment tools. It will grow without tax, and you can withdraw without tax as long as you stay within its limits. However, its limits may not be for everyone as you won\u2019t be able to use that money tax-free unless the cost is eligible.<\/p>\n\n\n\n