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Should you consider using a Health Savings Account?

3 min read

30 sec brief

Health Savings Account (HSA)  tax advantages are direct and clear. HSA contributions are tax-deductible, earn tax-free interest and are eligible for tax-free withdrawals (for qualified medical expenses) which means you can use tax-free money from your HSA to pay for health expenses. But should you be using an HSA?

Health Savings Account (HSA)  tax advantages are direct and clear. HSA contributions are tax-deductible, earn tax-free interest and are eligible for tax-free withdrawals (for qualified medical expenses) which means you can use tax-free money from your HSA to pay for health expenses. But should you be using an HSA?

Should you consider using a Health Savings Account (HSA)?

We noted the tax advantages above, but let’s not forget a few additional features. HSAs can be used for years to come. Save the money, invest it, let it grow and use it for out-of-pocket qualified medical expenses or save for retirement.

HSAs require no specified distributions in retirement. So they offer more financial flexibility (and tax benefits) than traditional retirement savings vehicles like a 401k or IRA.

38% of US employers contribute to their employees HSA. You might be missing out on free money! Talk to your HR professional or benefits manager to see if your company offers HSA eligible healthcare plans or if your employer is one the many contributing money to their employees’ HSAs.

HSA Value for Young Individuals

Younger individuals commonly have lower health costs than other individuals. Using an HSA coupled with an HSA eligible plan (like a High Deductible Health Plan) is a great healthcare strategy to save both employers and employees money. You can save money tax-free for expected health costs in years to come.

HSA Value for the Growing Family

There is no question, income allocation and savings gets harder as you add dependents to your household. Little Johhny might not understand the value of an HSA today, but you can wow him with your HSA balance in years to come. HSAs provide a great opportunity to pay for unexpected health costs, even if you need to contribute after the fact. Remember once you have established your HSA, you can use tax-free dollars to pay for medical bills and other qualified out-of-pocket medical expenses, even if you add those contributions after the quality event.

HSA Value for the Older

Retirement is full of wonder, leisure, and relaxation, but it’s also filled with health costs. Retirement healthcare costs are expected to exceed $275,000 for couples – on top of Medicare! Maxing out your HSA prior to retirement (if you have an HSA eligible plan), creates the only way to save tax-free money and pay for qualified medical expenses tax-free as well. Any HSA money you don’t use for medical expenses, after 65 years of age, can be used for anything, just like an IRA or 401k.

Please consult with a licensed professional before making investments or tax decisions.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

About the author

Lively

We are HSA Experts! Lively is a Health Savings Account (HSA) platform for employers and individuals. A 401(k) for healthcare.

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