Health Savings Accounts (HSAs) A Smart Way to Save for Medical Expenses
A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals save for future qualified medical expenses.1 It’s often paired with a high-deductible health plan (HDHP).2
How HSAs Work
- Tax Benefits: Contributions to an HSA are typically tax-deductible, and withdrawals for qualified medical expenses are tax-free.3
- Triple Tax Advantage: You get tax benefits on contributions, earnings, and withdrawals for qualified medical expenses.4
- Investment Potential: Many HSAs allow you to invest your funds, potentially growing your savings over time.5
- Rollover Benefits: Unused funds roll over year to year, allowing you to accumulate savings for future medical needs.6
Qualified Medical Expenses
A wide range of medical expenses can be paid for with HSA funds, including:
- Doctor visits7
- Prescription drugs8
- Dental and vision care9
- Over-the-counter medications (with a prescription)
- Health insurance premiums (after age 65)
- Long-term care services (after age 65)10
The Benefits of HSAs
- Cost Savings: By using pre-tax dollars to pay for medical expenses, you can reduce your taxable income.11
- Financial Security: HSAs provide a safety net for future medical costs.12
- Flexibility: You have control over how you use your HSA funds.13
- Potential for Growth: Investing your HSA funds can help them grow over time.14
Choosing the Right HSA
When selecting an HSA, consider the following factors:
- Fees: Look for an HSA with low fees, including account maintenance fees and investment fees.
- Investment Options: Choose an HSA that offers a variety of investment options to suit your financial goals.15
- Customer Service: Good customer service can make managing your HSA easier.
By understanding the benefits and features of HSAs, you can make informed decisions about your healthcare finances and secure a healthier financial future.16
Would you like to know more about how HSAs can be used in retirement planning or how to choose the best HSA for your needs?