Have you ever gotten a medical bill and were shocked at how much the total cost was? Medical and healthcare services can be costly and cause a significant dent in your bank account. This is when the Health Saving Account (HSA) comes into action.
Not many people have an HSA, but you should consider having one in an emergency. With an HSA, you have money to pay for your healthcare expenses.
What is an HSA?
A health savings account (HSA) is a personal savings account made just for medical purposes. This is a tax-advantaged account that you can use to pay all the medical and health care bills like deductibles, copayments, coinsurance, and more. This account allows you to pay dental expenses, vision care, copays, and doctor’s prescriptions.
Many banks, credit unions, and other financial institutions offer HSA, and the money you contribute is tax-free as long as you use it for qualified, out-of-pocket medical costs such as:
- Ambulance cost
- Doctor visits
- Hearing aids
- Prescription drugs
- Qualified long-term care services
However, you need to know that this can only be used by people with high-deductible health insurance. It is also crucial that you know you can’t use the money from these accounts on anything other than healthcare services; otherwise, you will be penalized.
How Does it Work?
Now, you might be wondering how an HSA works.
Each year, the person who has this account contributes some amount to this account. According to Forbes, a person’s coverage can go up to $4,150. If the account is for the family, the coverage can go up to $ 8,300.
You can get a credit or debit card and maybe checks that you can use to pay medical expenses. All you need is to be eligible for the account, set it up, and start adding money.
Benefits of an HSA
Save on Taxes
One of the significant benefits you can have is that you won’t have to pay taxes on the amount you are saving or the interest you earn in the account. This amount will go into your account before you pay the annual taxes. This means that it will reduce your taxable income. Hence, you will be paying less tax on your total amount.
Save on Medical Expenses
The health savings account is made for medical expenses. When you use the money from this account, the money will be tax-free. There are also different discounts that you can get if you use the money from your health savings account instead of using your own money.
No Expiration Date
Like a traditional or high-yield savings account, your HSA contributions don’t expire. The money stays there until you use it.
Possible Use for Spouse or Dependent
If you have a spouse or dependent, you can use your HSA to pay for qualified medical expenses even if your HSA-eligible plan doesn’t cover them.
Invest the Money
Some HSA accounts allow you to save money while investing in mutual funds, bonds, and other stocks. This means that as you save money, you also make some money. However, this is not eligible for every person, and you must maintain a certain amount of balance.
Save for Retirement
After age 65, you can use the savings of the HSA in any way you like. This means you can take out the money and use it for other expenses without worrying about any penalty. The funds you add to this account can still be used for medical expenses.
Save Money on Health
With an HSA, you don’t have to stress about covering your medical expenses. Whether you are single or have a family, you can manage your healthcare expenses efficiently while enjoying the tax advantages. As healthcare expenses continue to rise, having an HSA is an effective solution for securing financial well-being.