HEALTH SAVINGS ACCOUNT: INTRODUCTION
In essence, health savings account shoulders any health- and medical-related expenses that are not included in the high-deductible health plan. Payments are given either by the holder or the company. Contributions can be invested or deposited in an interest-bearing savings account. Withdrawals from this account and returns from investments are tax-free, provided the money will be used for acceptable medical expenditures.
HSAs are movable, meaning it is not linked to the company in any way and you can bring the account with you in the event you switch jobs. Payments are not designed as spend it all or lose it all, and unused balance won’t expire or be wiped out from your health account. You can contribute from your savings account or through salary deductions. Other people, say your relatives or colleagues, can pay your HSAs as well.
This special account has some tax advantages. HSAs help you generate money faster than any other types of accounts or plans. As we have mentioned earlier, payments are taxable but not returns and withdrawals. But this account may only be used if you have touched the annual contribution cap and you hold a high-deductible insurance policy. One advantage of holding an HDHP is you pay lower premiums, unlike in other insurance policies that have lesser deductible. You can benefit from this coverage if incur low healthcare expense for a given year.
Let this tutorial navigate you through the brass tacks of health savings accounts. We will cover the following topics:
- Eligibility / Requirements
- Contributions / Payments
- Using money from an HSA
- Difference of limited purpose FSA, flexible spending account, and HSA
- Techniques for using the account at every turn
- HSA as valuable retirement tool
Many holders think FSAs and HSAs are interchangeable, but the two accounts have differing contributions and criteria. They also fail to realize how an HSA can amplify your retirement savings and maximize this account. The next tutorial will discuss the qualifications or prerequisites to having an HSA.