By Nance Ebert, Contributing Writer
REGION – A Health Savings Account (HSA) is used to save and pay for future medical expenses. But bear in mind, there are many things to take into consideration when participating in one.
An HSA is basically a savings account that is used to cover the expenses for qualified dental, vision and medical necessities. This account works along with your High Deductible Health Plan (HDHP).
Once you have been enrolled in a qualified HDHP, there are a few options to set up your Health Savings Account. Some banks and financial institutions offer them but may charge a fee to maintain the account. Your Human Resource Department at work can be helpful as well in directing you. You cannot be enrolled in a HDHP if you have signed up for Medicare.
Some companies may contribute money to your HSA if you have health insurance through your employer. You can also make payroll deductions, which are pre-tax contributions to your HSA. In addition, you can make online transfers, send in personal checks, money orders or online deposits. These are made with after-tax dollars; therefore you will get the tax benefits when you file your taxes for that calendar year. Another way to fund your Health Savings Account is to make a once per lifetime transfer from an Individual Retirement Account (IRA). Any money taken out of the HSA and used for qualified expenses is tax-free. This is a huge benefit.
In deciding if a Health Savings Account is right for you, some things to keep in mind are: if you are nearing retirement, your budget, what, if any, types of healthcare you might need in the next year or so and more. One disadvantage to this notion is that predicting scenarios, especially with one’s health is sometimes not possible. When a person becomes ill, expenses can accrue overwhelmingly. Trying to put funds aside in case of a medical emergency is sometimes not feasible.
The past two years have shown that the COVID-19 pandemic and costs associated with it have persisted.
Lively, Inc., a Health Savings Account service provider, stated, “It is essential to increase awareness and education around HSAs. That way, if the unthinkable happens, again, Americans will be able to access the services necessary to help get them back on their feet.”
There are many expenses that your HSA covers. Those include eligible dental, health care and vision expenses for yourself, spouse and eligible tax dependents. Some of the expenses that are covered can include many common over-the-counter medications. According to the Sanford Health Plan, “the following expenses are now eligible to use HSA funds without a prescription. These common expenses are cold and flu products, pain relief medications, heartburn medications, menstrual products and allergy products.”
Some additional examples of qualified medical expenses are doctor’s fees, laboratory fees, chiropractor, ambulance services, hearing aids, vaccines, wheelchairs, x-rays, psychologist, surgery, prescription medications and more.
Benefits generally outweigh limitations
There are maximum limits to the amount of funds deposited into your account each year. For a single person, the limit is $3650. For a family, the limit is twice that amount at $7300. If you are at least 55 years old, you can contribute an extra one thousand dollars per year. There is no minimum balance that is needed to open an account.
You own the money in this Health Savings Account. It makes no difference whether you change jobs or even retire. It keeps earning interest tax-free. If you don’t use your funds, after the age of sixty-five, HSA funds can be withdrawn for non-qualified expenses without being penalized. However, they will be subject to income tax.
Through deposits, your Health Savings Account accrues and can grow over time. Some Health Savings Accounts allow you to invest in mutual funds and other investment vehicles.
The highlight of having a Health Savings Account is that the money in it is yours. You can invest it so it can grow over time and if used properly, it is never taxed. For many who take advantage and participate in such a program, there is peace of mind in knowing that, through their efforts, funds will be there to help pay for future health and medical needs.