Health savings accounts (HSA) are designed as medical-specific savings accounts that let you save money for medical expenses. Health savings accounts are an option for individuals or families with high deductible health plans (HDHP), meaning their initial medical expenses would come out-of-pocket. Individuals on Medicare, low-deductible health plans and those who aren't insured are not eligible for an HSA.
Savings and Security
Even if you have health insurance, you could find yourself in trouble should a medical expense arise when you don't have money to pay the deductible. An HSA covers this circumstance and lets your money accrue interest in the meantime. HSAs are also cost-effective--they are inexpensive to set up, and many consumers find they are able to lower their insurance premiums by investing in an HSA and raising their deductible.
Portability and Ownership
You can change your job or insurance without having to change your HSA, and there are no maintenance or processing fees for making an insurance switch. You also have complete rights to the money in the fund--some similar accounts require the money to be used periodically to avoid penalty. An HSA operates similarly to an IRA in that it will continue to accrue interest without any risk or penalty on your part.
Tax Benefits
Payments into an HSA create tax savings in three different ways. You can use the payments as tax deductions, and the earnings through interest are also tax-free. In most cases, any money withdrawn for medical purposes is also tax-free. Though if you withdraw to access the money, it will be taxable.
Member Comments