First things first, what exactly is a Health Savings Account (HSA)? An HSA is an untaxed savings account that you can apply to deductibles, copayments, and other health care costs. There are many benefits to opening an HSA, but it may not be the right fit for everyone. We’ve outlined the many advantages and disadvantages of opening a Health Savings Account below.
Advantages of Opening an HSA
1. Tax-Free Benefits
Perhaps what’s most appealing about a Health Savings Account is all the tax advantages it offers. Any money you deposit into your HSA is untaxed, meaning a big discount on your medical expenses!
As a bonus, any grossed interest is also tax-free and belongs to you until you are ready to use it for qualifying healthcare costs.
2. Others Can Contribute
An HSA is unique in that others can contribute to it as well! That means your relative, employer, or anyone else can add to your Health Savings Account if they want to. The IRS does have set limits on HSA contributions each year.
3. You are the Owner
Even though others can contribute to your HSA account, no one else can take it from you. Your Health Savings Account is owned and controlled by you and you alone.
If you change employers or insurance companies, or even lose your health insurance altogether, the money in your HSA will still be yours. Even when you die, if there is money left in your account, it won’t go to the government, it will go to your beneficiary.
4. Annual Rollover
Health Savings Accounts are more attractive than Flexible Spending Accounts (FSAs) because they always rollover. This means if you have money left in your HSA at the end of the year, it will rollover into next year. FSAs will only allow you to rollover a certain amount into the next year.
5. Good Retirement Tool
Most people use their HSA as a retirement tool, as they should! With annual rollover and no limits on how much you can earn in your Health Savings Account, it’s the perfect retirement account. If you wait until age 65 to withdraw funds from your HSA, you will not pay any fees besides income tax. You can also use the money for anything, which means it doesn’t have to be used for medical expenses. It can be used to buy your dream car, vacation, or anything your heart desires!
HSAs will often issue account holders a debit card to pay for medical expenses. This way you don’t have to call about a reimbursement or worry about how a medical bill will be paid. With an HSA debit card, you can use money from your HSA on the spot or use it to pay a medical bill over the phone.
7. Covers a Variety of Medical Services
A wide range of medical expenses can be covered by your Health Savings Account. With your HSA debit card you can easily pay for dental, vision, and primary care services or prescriptions – even over-the-counter medical needs. If your health insurance doesn’t cover the service or prescription, your HSA dollars can still be applied.
Disadvantages of Opening an HSA
While there aren’t many disadvantages of opening an HSA, it may not be for everyone. HSAs tend to have higher deductibles but lower premiums which can be stressful, especially for someone who is planning any major medical procedures.
An HSA account holder will also need to be organized in order to keep up with receipts and medical bills. This is necessary to protect yourself in case you are audited by the IRS.
Why open an HSA?
Opening an HSA could be the best choice for you or a family member. If you’re considering opening a Health Savings Account, I’d love to answer any questions or concerns you may have. Please give me a call at 574-306-2028 or if you’re looking for a new health insurance provider, get your free quote today!