Benefits of a health savings account

Benefits of a health savings account

Don’t know which insurance plan to choose? Opting for a high-deductible health plan and opening a health savings account could save you money.

  1. Your paycheck goes further with pre-tax contributions Health Savings Accounts (HSAs) offer a triple tax advantage:

Through payroll deductions, you can make contributions to your HSA on pre-tax basis. Because you don’t pay federal taxes, the money you put in your HSA could go further in paying for your family’s health care.

Federal tax-free interest and investment earnings could help you save more for qualified expenses.

Withdrawals for qualified health care expenses are also federal tax-free when paying for qualified health care expenses.

  1. Your HSA doesn’t expire

Any unused funds in your HSA roll over from year to year and are available to you anytime, now and in the future. You can spend this year for routine health care expenses or save to help you be prepared for expenses in the future. It doesn’t matter if you change jobs, change health care plans or retire, the money in your HSA is yours  for life. And, when you designate a beneficiary, the benefits of your HSA will transfer to your heirs.

  1. The HSA investment feature provides the opportunity to put your money to work for your future

With the option to invest your HSA balance in a wide range of mutual funds, you have the opportunity for federal tax-free earning potential that could help you build your account balance over time. You can set up your investment account at any time, and the sooner you get started with saving and investing your HSA balance, the more time you’ll have to build your health care nest egg for retirement.

  1. Your HSA is flexible to help you meet your needs and goals

When you use your HSA depends on your day-to-day needs and long-term goals. While you have the flexibility to withdraw as little or as much as you need to help pay for health care expenses, the HSA is really designed to help you save money and build up your balance so that you’re prepared for future health care expenses, including in retirement when you’re likely to have more medical expenses and less income.

  1. An HSA can help you take care of your loved ones

If you claim a family member on your taxes, you can use your HSA money for their qualified medical expenses – even if you just have single coverage.

  1. Helps to manage expenses

Combined with a qualified high deductible health insurance plan, an HSA can be a good way to manage your healthcare expenses.* By contributing money into an HSA, you’ll be surprised at how quickly your savings can add up.

The money in your HSA could be used for medical expenses or can be left to grow over time. You are in control of your money, and all contributions remain in your account until you use them.

You can use an HSA to meet your insurance deductible and pay other qualified medical expenses that aren’t covered by your plan. Some employers match what you contribute—an even better reason to have one.

  1. You could save on taxes

Money is deposited into an HSA without being taxed and any investment earnings you may accrue in the account aren’t taxed, either. Any earnings that you might gain in an HSA aren’t included in your income while held in the HSA.

Amounts spent on qualified healthcare expenses are tax free—though you do have to report both contributions and expenses when you do your taxes each year. If you do withdrawal from the account for non-qualified expenses, it is taxed according to your current tax bracket and may be subject to an additional tax.

  1. The money is always yours

Unlike a Flexible Spending Account (FSA), an HSA is not a “use it or lose it” situation. There are limits to how much you can contribute each year, but the good news is, the money in an HSA rolls over year to year. It’s your money forever, even if you change employers or leave the work force.

You can start using funds in an HSA as soon as a deposit has been made and funds are available. An HSA will come in handy when paying for copays or when you need to pay for qualified medical expenses, which could include items such as bandages, contact lenses, or crutches.

Need more information to help you understand insurance? Read our other healthcare-related articles.

*You must be enrolled on a qualified high deductible plan to qualify for an HSA. However, not all high deductible health plans are eligible to be paired with an HSA.

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