If you aren’t familiar with an HSA (Health Savings Account), read the Health Benefits Basics article before moving on to this read. Most employers offer some form of health savings options for their employees. Whether it’s in the form of an FSA or an HSA, it can come in handy.
For the sake of this article, we are sharing the perks of utilizing the HSA benefit option given to you by your employer. If you aren’t taking advantage, you will certainly want to start when you can!
HSA Perk #1: Never taxed when used for qualified medical expenses.
This perk applies to both FSA and HSA benefits. The primary use of an HSA is to take advantage of tax-free medical expenses. When signing up for your benefits through your employer, you have the option to contribute pre-tax funds to your HSA every paycheck.
There are certain contribution limits, but the money that is contributed to your HSA is never taxed, as long as it’s used for qualified medical expenses. Doctor visits, co-pays, prescriptions, contact lenses and glasses, are just a few qualified medical expenses.
HSA Perk #2: No “use it or lose it” policy.
This is the primary difference between an FSA and an HSA. An FSA functions exactly like an HSA with one big exception. If you don’t use the funds that you have been contributing to your FSA within a year’s time, you lose it all.
There are prolonged deadlines specified by the IRS. An HSA’s funds never expire. If you are healthy all year, your HSA funds roll over into next year’s pot! There is no deadline or timeframe required to use your HSA funds.
HSA Perk #3: Can be used as insurance premiums in between jobs.
This is huge! If you have been contributing to an HSA through your employer, but you are laid off, your HSA can float you through until you find another job. Whether you opt for a cobra plan, or an individual plan, your HSA can cover that cost. You may not have enough in your HSA for multiple months’ worth of premiums, but any out-of-pocket expenses that can be delayed is a good thing!
HSA Perk #4: Account Growth is tax-free.
Not only do you not have to worry about tapping into your HSA every year or it’s gone, your account can grow tax-free. Any interest that accumulates in your HSA through the years, is all yours and will not be taxed. This also applies to HSA investments. You have the option to invest your HSA funds, if you aren’t using them.
Any gains are tax-free as long as the HSA funds are used for qualified medical expenses. This is another reason to take advantage of the annual contribution limit, if possible. The annual contribution limit for 2017 is $3,400 for individuals and $6,750 for families.
HSA Perk #5: Living expenses after age 65.
If you have managed to accumulate a hefty HSA account by the time you reach 65, those funds can be used to take care of your regular living expenses. The only catch with this is that the funds used for living expenses are subject to regular income taxes. However, if you have enough funds to assist, it may be worth paying the taxes!
HSAs can be used to help you reach your deductible, and go with you wherever your career takes you. Some employers may even contribute to your HSA on your behalf! An HSA can truly come in handy, especially if unexpected medical costs come up. Don’t’ miss the opportunity to take advantage of this awesome benefit. Start contributing to an HSA, even if it’s $10/paycheck – it will add up.
Do you contribute to an HSA plan? If so, how much? Do you use it? Share your HSA and FSA experiences with other CGS readers by leaving a comment below!
