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Health Savings Account

With the soaring cost of health care, many consumers are turning to the health savings account (HSA) as a way to combat rising expenses. This financial option is quickly growing in popularity and has the potential to save you a significant amount of money. It encourages the consumer to make better health-care-related financial decisions and to invest and save money over time for future medical needs.

An HSA funds health care expenses in conjunction with a high-deductible health plan (HDHP), a requirement to set up an HSA. The HSA is a savings account that secures pretax dollars in a fund for future medical needs, and helps meet the deductible of the HDHP. Those funds can be used for qualified medical, dental, and vision expenses.

Contributions to HSAs through employers are set up as pretax investments. A benefit for many is that taxable income is decreased, so fewer taxes need to be paid out. The money can be invested in a savings or investment account. The funds grow tax free within the account, and can be removed with no tax penalty if used for covered medical services.

High-deductible health plans often come with much lower premiums than a traditional plan. This is especially apparent to individuals who pay premiums all year long but don’t go to the doctor or use medical services very often. For these people, paying a higher premium can feel like throwing money out the window.

If a consumer switches jobs, the HSA account follows. And, unlike traditional insurance plans, consumers do not lose unused funds in these accounts at the end of the year. The consumer “owns” the account and all the benefits that come from its good management.

Over time, a relatively healthy person or someone who is a decent financial manager can save a good deal of money and investment earnings in an HSA. Consumers who are 55 or older also have the opportunity to make additional “catch-up” contributions to the fund. Contributions are allowed so long as you continue to be enrolled in a qualifying HDHP plan, AND you have not enrolled in Medicare. After age 65, the account can continue to be used for medical, dental and vision expenses with no tax consequence. Withdrawals for other purposes are possible and are treated as income.

If you decide that your employer-sponsored group plan does not offer an HDHP with an accompanying HSA plan, we can help! If you are interested in hearing more about your options, or have questions relating to other insurance or employee benefits, please feel free to reach out to the professionals at Associated Financial Consultants, an Associated Group company at 954-983-5600.