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What is a Health Savings Account (HSA)?
Health Savings Account is an alternative to traditional health insurance. It is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.
What are HSAs benefits?
HSAs can provide significant tax benefits to eligible individuals. Not only can HSAs provide tax benefits related to paying qualified medical expenses, they may also provide benefits similar to many tax-favored retirement plans.
For example:
- HSA contributions, by employer or employee, are excluded from income.
- HSA earnings are tax-deferred. If used for qualified medical expenses, HAS assets are never taxed.
- Unused HSA assets may be used for retirement; however, they will be subject to a 10 percent penalty until the HSA account beneficiary turns age 65. If not used for medical expenses, they will be subject to income taxes.
- Upon death, HSA assets become the property of a named death beneficiary, or of the HSA account beneficiary’s estate. A spouse may treat the assets as their own HSA, while non spouse death beneficiaries must treat such assets as ordinary taxable income.
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Advantages Of Health Savings Accounts
Security
Your high deductible insurance and HSA protect you against high or unexpected medical bills
Affordability
You should be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible.
Savings
You can save the money in your account for future medical expenses and grow your account through investment earnings.
Ownership
Funds remain in the account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs.
Tax Savings
An HSA provides you triple tax
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