subject: Save Money With A Health Savings Account [print this page] Opening a Health Savings Account or HSA can help participants to save money in more ways than one. Many people think that HSAs save money by helping them reduce their annual income tax burden. Other people think that opening HSAs help to save money by allowing them to invest money in high-interest investments and grow their savings tax-free. While these are two celebrated HSA features, there are many more financial and peace-of-mind benefits to enrolling in a HSA.
Here are just 5 of the ways that Health Savings Accounts can help participants save money:
1. Smaller monthly premiums. HSAs accompany high-deductible insurance plans. With those high deductible insurance plans, participants will pay less each month towards their insurance premiums. They can then invest that monthly savings into their HSAs or use the extra money to pay down other debts, such as high-interest credit card debts.
2. A wide range of covered services. HSAs provide participants with money that they can apply to a wide range of healthcare needs, including eye care, dental care, and more. Because of the wide range of covered services, HSA participants can purchase many healthcare services and items tax-free. Plus, many of these items can be paid for using the interest from HSA investments, meaning that the principal investments into a HSA can stay intact an continue earning interest.
3. Health Savings Accounts do not expire. When a participant opens a HSA and qualifying insurance plan, the HSA contributions will be theirs until they are completely used up. If a HSA participant chooses to enroll in a different type of health insurance plan in the future, the HSA funds will still be available to him or her to use, even without the accompanying high deductible insurance plan. Therefore, when a participant invests funds from the HSAs into high interest yielding investments, that money can grow tax-free for years until the participant is ready to withdraw it.
4. Health Savings Account funds can be used for anything - not just healthcare services or products. When participants contribute money to their HSAs, they will receive a tax deduction on the contribution. This means that the amount of money that they contribute will be reduced from their annual income tax burden. They can then invest those contributions into high-interest investments, such as stocks and bonds. When those investments earn money, the growth is tax-free, but only when the funds are used to pay for qualifying healthcare costs. However, if a participant wants to use the funds to pay for something other than a healthcare expense, then the growth will be tax-deferred. This means that participants can still use funds from their HSAs to pay for a wide variety of things, including healthcare expenses, but not limited to healthcare expenses. The way the funds will be taxed depends on how those funds are used. Without a Health Savings Account, healthcare expenses must be 7.5% of a person's annual income in order to be tax deductible.
5. Participants can fund their Health Savings Accounts from their IRAs. If participants do not have enough money to fund their Health Savings Accounts out-of-pocket, they can fund their Health Savings Accounts from their IRA accounts, but just once. The Health Savings Account can then be used similarly to an IRA when a participant invests funds into high-interest stocks, bonds, money market accounts, and other investments.
Individuals also need to be aware that there are many different types of high deductible health insurance plans that can accompany a Health Savings Account. In order to find the best health insurance plan for their needs, it is wise for participants to speak with a qualified Health Savings Account advisor who can help them to determine the best plan for their family's needs, individual needs, budget, and health situation.
