What is a Health Savings Account (HSA)?
A Health Savings Account, also known as an HSA, is a type of medical account that allows you to contribute pretax dollars towards your medical expenses. It is a popular medical plan in the United States that provides a supplemental form of protection for a person’s health care needs in the event of unforeseen circumstances.
A qualified individual can set up a health savings account to cover the cost of qualified medical expenses like prescription medication, doctor visits, and hospital stays. That money won’t affect their annual taxable income.
How to access a Health Savings Account?
There are a number of ways you can get a Health Savings Account (HSA). One way is to find and enroll in an HSA-eligible health plan. Another option is to work with your employer and see if there is an HSA-eligible plan available.
When you set up an HSA, your employer will typically contribute a fixed percentage of your salary, while the government will help chip in through contributions to a health savings account. With an HSA you are able to set aside funds that can be used in conjunction with your employer’s plan, or on its own.
Maximum contribution to a Health Savings Account
Members of HSAs can have a maximum contribution of $3,400. HSA contributions are tax-deductible and withdrawals are tax-free, providing individuals with the flexibility to save on their taxes while they save for the future.
HSA contribution limits have been on the rise for the last several years. There have been some changes in contribution limits year to year. However, there are no restrictions during tax years. Contributions are tax deductible just like traditional IRA or 401k contributions.
Advantages of Health Savings Accounts
Health savings accounts (HSAs) are an alternative to traditional Medicare Part D drug plans. HSAs feature high deductible plans, money from premiums can roll over year to year. After you meet that deductible the majority of the cost for prescription drugs are taken care of by the HSA.
Health Savings Accounts (HSA’s) can be a great asset to have. There are plenty of advantages to using them. Making only contributions instead of paying the entire cost upfront can be beneficial, as you do not put all of your eggs in one basket.
There are many benefits to having an HSA, but one of the best is the tax-free interest and dividends it earns. When you have an HSA, you have more money to save and grow while taking care of your day-to-day medical costs.
Disadvantages of Health Savings Accounts
You might think that if you have a HSA, all your medical expenses will be covered, but not so. Health Savings Plans can be a great way to save money on medical expenses. However, they sometimes require high deductibles that you pay upfront before your insurance kicks in.
Another disadvantage of a HSA is that the requirements are specific and may not fit all citizens. For example, to be eligible for a Health Savings Account you cannot have coverage through any other health insurance providers that provide service in your area. This can include, but is not limited to, Medicare, Medicaid, and Private Insurance Co-Ops.
Ideas to manage your HSA efficiently
Now that we saw what is a Health Savings Account, let’s see few ideas to manage it efficiently.
Contribute the maximum amount available per year
The first tip we can give you to manage your HSA efficiently, is to contribute the maximum possible amount yearly. Retaining money is a complicated matter. However, by setting up the right budgets, you can establish a monthly plan to contribute to your HSA. Consequently, you’ll see that you’ll end up wasting less money than before – as most of it will actually be invested in your HSA.
Available for life & beyond
HSAs also act as a type of retirement account that doesn’t come with a traditional tax deduction. HSAs work like regular, after-tax investment accounts without the earnings being taxed when they’re withdrawn.
A good thing about the HSA is that it doesn’t have an expiration date. All the benefits you accumulate on it roll over during the years. Furthermore, you can also assign a beneficiary in case you decease. We strongly recommend taking advantage of this possibility, because if you don’t assign a beneficiary, your HSA will be part of your estate legacy, and will be taxable. Which makes things rather counter-productive…
An investing opportunity
As depicted earlier, the major advantage of a HSA is the fact that it is tax-free. Therefore, the HSA represents a considerable investing opportunity. Indeed, as any savings accounts, the HSA enables you to have returns on the money you save. Therefore, the more money, the more returns!
Furthermore, they are designed to work in tandem with employer-sponsored insurance plans, making them a crucial part of how millions of Americans manage their healthcare needs.
Pay your own medical expenses
As explained in the previous section, the more money you save on your HSA, the more returns you accumulate throughout the years. Although your HSA exists to help you pay for your medical bills, avoid using it to pay for minor ones. Keep the money in case you have a true necessity.
Another handy aspect of the HSA is that if you do pay your medical bills with your own money, and later find yourself in a complicated financial situation, you can reimburse yourself for these bills.
Ask for financial advice
Last, if what you are looking for is finding the right health, retirement or investment plans for yourself and your household, the best way is to look for financial advice. While HSAs are available from employers, you can also access them through various financial institutions such as banks. Give a call to your banker, and discuss your objectives with them so they can help you make the best financial decisions for yourself.
Is Finnt an HSA?
No, Finnt is not a HSA. Finnt is a regular savings account you can use for any expense. Finnt savings accounts are accessible to everybody. You need to be of legal age to register; however, you can make any family member (children, spouse, parents…) benefit from it by setting up sub-accounts for them.
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