How To Set Up a Health Savings Account?
HSA – What Is It?
A health savings account is a special kind of savings account. An HSA can help you save money for medical expenses if you are insured by a qualified high deductible healthcare plan. An HSA comes with multiple benefits. It is tax-free as well as acts as a long-term savings tool.
What Are the Benefits?
Some of the benefits of health savings accounts are:
- If you open an HSA, it helps you reduce your taxable income. Last year, people with individual health plans could direct $3,600 of their pre-tax income into HSA. For the family plan, the amount was $7,200. This year, both the amounts have increased to $3,650 and $7,300, respectively. Apart from this, interest earned on the invested amount is tax-free too.
- While investing in an HSA, you do not have to worry about your unused funds getting expired. Whatever amount remains in the account remains forever unless you use it. It gets rolled over from one year to the next.
- If you withdraw money from an HSA for any qualified medical expenses, it is tax-free. But, if the withdrawal is for non-medical expense, it will be taxable, and a tax penalty of up to 20% on the amount withdrawn can be charged.
- The tax penalty mentioned above is only for people below 65 years of age. After 65 years, any non-medical withdrawal is taxable but with no penalty.
How To Choose a Good HSA?
Here are some great tips to help you choose the best HSA:
- Always ask about administrative charges and other fees.
- Some HAS account holding banks waive the administrative fee if you maintain a specific minimum balance. Ask if such a benefit prevails in your case.
- Get familiar with the withdrawal and reimbursement process.
- Inquire about the investment options for the account.
- Finally, ask if you can manage the account online.
Where To Set Up An HSA?
Following places can offer you to open an HSA:
- Brokers and Financial Advisors
- Credit Unions
Once you know about the features or benefits of different plans, consider the options at hand, and go for the one that suits you best.
Health Beyond Insurance