Should I Choose an HSA (Health Savings Account)?
Many Americans ask themselves if they should choose an HSA (Health Savings Account) when it comes to planning for their health care. If they fully understand how the HSA works and what it does and doesn’t provide then they can come to a more qualified decision.
Here are some of the facts about HSAs:
- An HSA is basically a type of tax-sheltered savings account, which is sometimes compared to an IRA, but it’s used for health care expenses. The money you deposit into it is tax-deductible and is easy to withdraw by debit card or check. In addition, any money not used from the account each year will roll over and grow which can be used to supplement retirement.
- To qualify for an HSA you need to be covered by a high deductible health plan (HDHP). The minimum deductible for an HDHP deductible is calculated at $1,200 for an individual and $2,400 for families. This needs to be met before qualifying for the HSA. Also, the yearly out-of-pocket HDHP expenses, which include copayments and deductibles, can’t be more than $5,950 for an individual and $11,900 for a family.
- The account can be used to help pay smaller medical expenses until you meet the deductible. The HDHP can be used for any covered expenses that exceed the deductible. You have the freedom to choose which doctors and medical centers you want to visit with an HSA as you don’t have to use a network of providers.
- An HSA can be acquired by anybody under 65 years old with an HDHP. However, you aren’t allowed to belong to another health plan that isn’t qualified as a HDHP, but you can still possess other disability, vision, dental and long-term health policies. Individual HSA members can contribute $3,050 and families can deposit $6,150. If you’re 55 or older you can contribute an extra $1,000.
- You can open an HSA with numerous insurance companies and it’s a good idea to compare various accounts that are available. You might also be able to open an account via your employer and if you’re lucky they may help fund part or all of your HSA. If your HSA is provided though an employer and you change jobs the money stays in the account.
- There is a penalty if the money from your account is used for non-health expenses prior to the age of 65. If you use the money for non-medical expenses when you’re older than 65 there is no penalty, but the money will be taxed. Once you reach 65 you cannot contribute to the HSA anymore, but are free to use the money in the account as long as you like.
- Contributions to an HSA won’t affect your individual retirement account as it’s basically looked upon as another tax-deferred method to save money for retirement.
Talk to a licensed insurance agent to make sure that a health savings account is right for you.