stevepb / Pixabay: Savings accounts for a better health experience
Many don’t know that a Health Savings Account or HSA lets you save tax-free money. The funds can be used to pay out-of-pocket health expenses, and it helps that there is no deadline imposed to use it up.
How to Get an HSA?
Amnaj Khetsamtip/Shutterstock: Procedure of getting an HSA
The single-most essential eligibility criteria for HSAs is that you need to possess a high-deductible health insurance plan. Qualifying for Medicare nullifies your HSA eligibility. You also cannot be listed as a dependent on a third party’s tax return.
The high-deductible threshold set by the IRS is a minimum of $1,400 per individual. Still, it’s important to keep in mind that only some health plans are HSA-eligible .
How Do They Work?
You can only pay health expenses with your HSA, and it cannot be used for things like insurance premiums. The ceiling for out-of-pocket medical costs in 2020 is $6,900 per insured individual.
It’s possible to decide on a yearly contribution based on your income and regulations set by the IRS.
What Happens if the HSA Holder Dies?
You can assign a beneficiary of choice at the time of sign-up. If it’s your spouse, they will receive the money tax-free, but any other heir would have to pay the tax amount on the account value.
Advantages of Health Savings Account
Sven Mieke/ Unsplash: Life after getting a health savings account
HSAs are not subject to federal income taxes and aren’t listed in your gross annual income.
The contributions are tax-deductible.
Earned interest is also tax-free.
You’re not the only one who can contribute to the account. Your employer, friends, and family members can do too!
It’s portable, so even if you change the insurance company or employer, you’d still have access to the account.
HSA spending covers everything from birth control pills to eyeglasses.
Since there are no time limits to spend the funds, you can simply go on saving this money orinvesting it in smart ways.
Disadvantages of Health Savings Account
If you use it for anything other than qualified medical expenses , expect to pay hefty penalties on both the money and the tax.
You may be charged for account or transaction fees that are hidden. It’s best to ask your provider for a fee list when comparing your options.
How to Invest HSA Funds?
stevepb/Pixabay: Balancing your savings accounts
If you can afford it, contributing the maximum IRS allowed individual contribution of $3,550 per annum would reap great benefits later on. The good news is it can be an investment at the same time.
Through stocks, bonds, or relatively safer low-yielding funds, you can grow the HSA balance, which would be a blessing after retirement.
So find a good plan with minimum costs and profitable investment options. Your retired-self will definitely thank you later!
