Do you currently have a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA)? If so, count yourself lucky.
There are many advantages to having an HSA, including tax benefits and the ability for it to double as a retirement account.
Here are 6 reasons to take advantage of enrolling and contributing into an HSA.
1. Save on Uncle Sam
Every penny you put into your HSA is considered pre-tax. I repeat, every penny! This is a significant advantage of the HSA and makes contributing to one that much more attractive. If your currently in a traditional health care plan, such as a PPO or HMO, and you have a lower deductible with flat dollar copays, everything you pay Out-of-Post is on post tax basis. Imagine not having to pay taxes, how much more would you save to be able to use toward your healthcare costs? The maximum allowable contribution for 2019 is $3,500 for an individual and $7,000 for a family.
2. My Precious....It's Mine! All Mine!
Unlike a Flexible Spending Account (FSA), there is no "use it or lose it". Many people like having a FSA to provide that taxable savings used on qualified medical expenses. The drawback is that if you don't spend the hard earned money you put away, it's gone at the end of the year. At a minimum your employer may have a provision that allows for you to carry over up to $500 to the new plan year. An HSA rolls over year-after-year and it's YOUR MONEY!
3. 401(k) For Healthcare
Your HSA account can build up quickly, if you stay healthy. Not always a choice you have, but for many they never go to the doctor, expect for their routine or annual exams. ACA has you covered there with the provision requiring plans to provide preventative services in-network covered at 100%. No out of pocket there! So your money now as the ability be used as an investment into your future health. Post 65 you can use your HSA funds, free of tax and penalty, for qualified medical expenses as well as to pay for Medicare Parts A, B, D and Medicare Advantage Plans, but not Medigap! Want to buy a boat when you retire after 65. Go ahead. After 65 you can withdraw your funds and there is no penalty. HSA withdraws at this time in your life would only be treated as regular taxable income. The same treatment as regular IRA withdrawals.
4. Take this Job and Shove It
Remember #2. It's all yours. If you have an HSA through your employer, the money in the account is yours. It goes with you, unlike a Flexible Spending Account. You can choose to transfer the money to a different bank, if you wish, or keep it with the existing HSA custodian.
5. Time Waits For No Man
Except if you have an HSA as there is no deadline for reimbursing yourself. As long as the medical expenses were incurred after you set up the HSA account you can reimburse yourself years or decades later. That is after letting the funds grow in the meantime.
6. Where Were Going We Don't Need Roads
While your health may be a winding road, the future is unpredictable and the cost for care should you have the need for Long Term Care is expensive! The good news is that should such a situation arise in which you need long-term care, your HSA assets can be used for qualified Long-Term Care Insurance Premiums and Qualified Long-Term Care Services.
If you don’t end up needing long-term care, your HSA can be passed on to your heirs, similar to a retirement account.
Health Savings Accounts are becoming more common as more employer’s are offering these plans. It's not a plan for everyone, but for some it can be quite ADVANTAGEOUS!