A health savings account (HSA) is a type of savings account that lets you pay for eligible healthcare expenses and save for out-of-pocket costs that your insurance plan doesn’t cover. Although a health care savings account isn’t right for everyone, if you’re under the age of 65 and you have a high-deductible health insurance plan, having an HSA can provide many benefits!
You save on medical expenses and taxes
If you want to save on taxes, a health care savings account can help you do that. The money you contribute to your HSA goes into the account before taxes. As a result, it lowers your taxable income and you pay less in taxes. Additionally, you can also save on medical expenses by using the funds in your HSA to cover copays, coinsurance, and your deductible, as well as healthcare services that your insurance doesn’t cover.
You stretch your money further
All the money you put into your HSA earns tax-free interest. So, essentially, your healthcare savings account will be earning you money! Also, any money you don’t use this year will roll over into the next year. Plus, if you don’t need to use the funds to cover healthcare expenses for one year, you can save or invest it (which brings us to our next point).
You can invest a portion of your balance
If you have an HSA, you can invest a portion of those funds in mutual funds, stocks, and bonds. However, there are certain limits. You’ll need to maintain a balance of at least $2,100 before you can invest any of it and you can’t make payments for qualified medical expenses directly from your investment account.
You can save for retirement
If you want to use your HSA to save for retirement, you can also do that. Once you turn 65, you can use the funds for any purpose without paying penalties. Any money that you take out to pay for eligible healthcare expenses will continue to be tax-free.
As you can see, there are many benefits of having a health care savings account. If you want to set up an HSA, your bank can help. Or, if you get your insurance through your job, you can ask your employer for recommendations on where to open an HSA.
Author Resource:-
Daniel Stewart has been helping people with their money management and personal finance with over 15 years’ experience in business finance. You can find his thoughts at savings guide blog.
