Are you looking for an excellent way to secure your health expenses? Health Savings Account (HSA) provides multiple benefits and the required flexibility. It is like having a personal savings account, but you can use the money only for qualified medical expenses.
A few qualified medical expenses include doctor’s visits, lab tests, purchase of medical equipment, most dental treatments & vision tests, addiction treatments, and much more.
Keep reading to understand more about health savings accounts.
Who Can Start a Health Savings Account?
Individuals with a high-deductible health plan (HDHP) are eligible for HSA. An HDHP refers to an insurance plan with a high deductible. A deductible is the amount of money that can be deducted from your gross income. A higher deductible means less tax. A wealth management professional can give the details of other eligibility criteria.
Advantages of HSA
Your HSA Does Not Expire
Regardless of age or employment status, the money in your HSA account remains with you. The funds can be used even after your retirement.
Also, this money does not expire at the end of the year, unlike the Flexible Spending Accounts, which follow the ‘use it or lose it “ rule. As there is no pressure to use up all the money from your HSA, this can be an excellent investment for your retirement planning.
Tax Exemption
The tax exemption benefit is why HSAs are popular among investors. Contributions to this account reduce the amount of tax owed. Even your interests are exempted from paying taxes. Withdrawals from HSA accounts are also non-taxable. As a result, you will receive three tax benefits from one account.
Can Be Used for Family
The money from the HSA account can be used for yourself, your spouse, and other dependents. So a single account can cover the health expenses of the whole family.
Easy to Use
Most HSA accounts provide a debit card that can be used for any eligible expense. You can also reimburse later if paid using an alternate mode of payment.
Disadvantages of HSA
Require a High Deductible
An essential eligibility criterion for opening an HSA is to have a high deductible health plan. It might not be possible for everyone, especially when there is a recurring health expense.
Higher Penalty
You have to pay a high penalty if you withdraw money for non-qualified expenses. In some places, it goes up to 20% of the funds withdrawn.
Contribution Age Limit
You can not contribute to HSA after age 65, even if you are still employed.
It is always a good idea to thoroughly understand all the conditions, prerequisites, and procedures involved before investing in any plan or opening a new account. The experienced team at Hampton Wealth Management can perform a complete analysis and give you a clear picture. Call 412 600 2725 or click here for any finance and wealth management services.