If you qualify for a Health Savings Account but are undecided as to whether or not you should open one, here are some points to help you decide:
- Immediate Tax Savings – Contributions to your HSA qualify as a tax deduction. That is, they reduce your taxable income for that year dollar for dollar as much as you legally contribute.
- You Can Use Tax-Free Money – You can use the funds in your HSA to pay for IRS-qualified medical expenses not covered by your health plan. Again, it is important that you make sure your expenses are qualified, but if they are, your money can pay for these expenses tax-free. This even applies to expenses in retirement, such as Medicare and long-term care premiums.
- An HSA Can Help You Meet Your Long-Term Financial Goals – In addition to earning basic interest, funds in an HSA can be invested in several options that are usually self-directed. Much like the funds in your 401(k) or IRA, these funds can play a huge role in your total retirement planning.
- You Can Take It With You – The contributions made by you, and even those given by your employer, are yours to keep. They stay with you even if you change jobs or plans. Unlike Flexible Savings Accounts, there is no use-it-or-lose-it rules, meaning you can hold onto these funds year after year and watch them grow.
- You Can Use It For Anyone In Your Family – Even if you are enrolled in an individual plan for yourself, you may use your HSA funds for any IRS-qualified medical expenses for those in your family.
These are just five reasons why opening an HSA makes so much sense if you qualify based on your healthcare plan. Not only does it help with medical expenses, it can also be a helpful tool in achieving your future financial goals.