If you’re currently covered under a high-deductible health plan, then a health savings account (HSA) could help you save money while investing for the future. Read on to learn about the benefits of an HSA as well as what you can do to make the most of your account.
The Triple Tax Benefits of an HSA
- Contributions to an HSA are completely tax deductible up to the annual limit, which varies based on whether the account is for an individual, a family or a worker over the age of 55.
- Just like a phone plan with rollover minutes, whatever funds you don’t use will carry over to the next year and can grow tax-deferred. This gives you more control over what to spend and what to save.
- Withdrawals are never taxed as long as they’re used for a qualified medical expense. By using tax-free money to meet your deductible and pay for other out-of-pocket costs, you can ultimately reduce how much you spend on health care.
Three Ways to Maximize Your Account
- If you already have the funds to cover a medical expense, you may not want to use the money in your HSA. Instead, consider using your credit card to pay the bill and earn rewards. Just make sure to keep the receipts so you can be reimbursed later.
- Once you’ve funded your HSA and compiled a few medical receipts, then your account can double as an emergency fund for other life events. Simply submit the receipts to get a check from HSA, and use that money to cover the nonmedical event.
- Create an IRA for your medical expenses, so to speak, by moving a portion of your savings into an investment account within your HSA. This action will allow you to invest for your future, when your health care costs may begin to increase.
Reach out if you have any questions!