Health Savings Accounts Might Be Just What You Need

Not many people really know that much about Health Savings Accounts.
Knowing more will show you how valuable they can be for you and your family.

In 2003, Health Savings Accounts (HSAs) came into effect. They were launched as the greatest thing since sliced bread and promoted heavily.
Five years later many people still aren’t as informed as they should be about Health Savings Accounts and how they work.

As part of the Medicare Prescription Drug, Improvement and Modernization Act, HAS’s help US citizens under 65 save money for qualified medical expenses on a tax-advantaged basis. People who purchase a qualified High Deductible Health Plan may open a Health Savings Account. The money deposited into the HAS may be deducted from your taxable income at the end of the year. The nice thing is premiums for HAS qualified health insurance plans are much lower when compared to regular PPO and HMO insurance plans.

The tax benefits you can accrue with HSAs are:
• deposits and earnings aren’t taxed and
• there is no “use it or lose it” qualifier
• Money you save in the account isn’t taxed upon withdrawal if you use the money for qualified health expenses.

The HSAs are portable, you are the owner. If you have an HSA with an employer and you leave that employer, the money you have saved in the HSA is still yours. Many people confuse MSA’s (Medical savings Accounts) which are employer owned with HSA,s (Health Savings Accounts) which are owned by the individual employees.

Since HSA’s are owned by the individual they are totally flexible. Of course you must have a Qualifies High Deductible Health Plan (HDHP) in force when you want to make any deposits. Many people who have HDHP never open an HSA. But when they do they can deposit as little or as much as they want up the limits set the IRS. If you’re looking for flexibility in terms of payments, then a Health Savings Plan might just suit your budget.

The second way to contribute to a health savings plan is your employer may make non-taxable contributions for you. Or employers with cafeteria plans may allow workers to contribute untaxed salary through a reduction in salary.

If you’re 55 or older, you can make catch-up contributions to your account. This might sound similar to an IRA, and that’s because it is similar. Funds in the account grow tax-free and there are penalties for withdrawing the money for non-medical purposes. When you do turn 65 you can withdraw the money and it will be taxed as regular income. But, if after you are 65 years old, and you use the money in your HSA for medical expenses, you can withdraw the money and not be taxed.

Because of their flexibility HSAs can come in real handy. They’re well worth considering for protecting yourself when you most need it. So if you don’t have health insurance and need it, take a look at a HDHP and then supplement it with a health savings account. Find out if this is the perfect coverage for you by talking to a qualified health insurance broker who can guide you through the process.


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