Your employer provides many medical benefits to help you and your family stay well.
But did you know they may also offer opportunities to help you save money on health care costs, while letting you set aside money for the long-term? If your employer offers one, here are some extra ways to save with a health savings account, or HSA.
What is an HSA?
An HSA is a type of savings account that can help you offset certain medical expenses and lower your out-of-pocket costs. It’s usually offered when you participate in a high-deductible health plan (HDHP). You can use your HSA funds to pay for things like deductibles, copays, dental and vision care, prescription drugs and much more.
You can add funds to your HSA by designating an amount to be withdrawn from your paycheck each month. Your employer may also make contribute to your account. When you need to make a withdrawal, simply use the debit card linked to your account to pay for eligible expenses.
Benefits of an HSA
HSAs provide a number of tax benefits. Since money you contribute is pre-taxed, your taxable income also becomes lower, meaning you’ll pay less in taxes. Additionally, any interest earned on your HSA funds is tax free. You might also be eligible for a tax deduction come tax time.
Another plus with an HSA is your unspent money rolls over at the end of the year. This sets it apart from other types of spending accounts, which can be “use or lose it.”
One thing to beware of though is using HSA funds for non-eligible purposes can come with stiff penalties and will also be subject to income tax.
Letting your money grow
If you want to plan for anticipated medical expenses rather than more immediate ones, some HSAs let you invest your contributions. This can give you a chance to grow your money over time to cover future medical expenses.
Planning for retirement
Just because you stop working doesn’t mean your HSA does. Funds in your account can pay for medical expenses long after retirement. Qualified, tax-free HSA withdrawals can help pay for things like Medicare premiums, hearing aids, wheelchairs and walkers, in addition to office-visit copays and deductibles. You can also use your funds if you need in-home care, long-term care services, nursing home care and even retirement home fees. Withdrawing from your HSA account rather than a retirement account will save you from being taxed on medical necessities.
Did you know?
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- If you switch jobs, your HSA goes with you.
- Even if you change health insurance plans, your HSA funds will still be available.
- The funds in your HSA don’t expire, which means any money that isn’t spent is rolled over to the next year for future health expenses.
- You can invest the funds in your HSA to grow them.
- To be eligible for an HSA, you typically must be enrolled in a high-deductible health plan (HDHP).
With open enrollment around the corner, remember to explore extra ways to save with a health savings account. You can reduce the stress of both expected and unexpected medical expenses, while saving for your future!
If you’d like to learn more about spending accounts, check out this article or the All About Spending Accounts video on our YouTube channel.
This article is for informational purposes only and is not meant as medical advice.
Health benefits and health insurance plans contain exclusions and limitations. There may be fees associated with a Health Savings Account (“HSA”). These are the same types of fees you may pay for checking account transactions. Please see the HSA fee schedule in your HSA enrollment materials for more information.
Investment services are independently offered through a third party financial institution. By transferring funds into an HSA investment account you can potentially benefit from capital appreciation in the value of mutual fund holdings. However, you will also be exposed to a number of risks, including the loss of principal, and you should always read the prospectuses for the mutual funds you intend on purchasing to familiarize yourself with these risks.
The HSA investment account is an optional, self-directed service. We do not provide investment advice for HSA investment account participants. You are solely responsible for any investment account decisions you make. Mutual funds and brokerage investments are not FDIC-insured and are subject to investment risk, including fluctuations in value and the possible loss of the principal amount invested. The prospectus describes the funds’ investment objectives and strategies, their fees and expenses, and the risks inherent to investing in each fund. Investors should always read the prospectus carefully before making any investment decision. System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance, and other factors.
