During open enrollment one important decision that has to be made is which medical plan is best for your situation. When comparing the health care plans, if you have a plan option with a high deductible paired with a health savings account, do not immediately rule it out. Below are 5 reasons to consider this plan:
Triple Tax Advantage
Money put into your HSA is with pre-tax dollars
Withdrawals are tax free, as long as used for qualified medical expenses
Can often be deducted automatically from your paycheck
Pay medical expenses with pre-tax dollars
Use HSA funds to pay for qualified medical expenses (including dental and vision services)
Without the HSA, the only other way to deduct medical expenses is by itemizing your deductions on your tax return and they must exceed 7.5% (2020) of your gross income
HSA is Portable
The HSA is owned by you and does not have a “use it or lose it” option
If you deposit money into the HSA, the funds remain in the account and are available in future years
This is the primary difference between the HSA and the FSA
If you change jobs, the HSA can go with you
Account Grows
Funds are kept in interest bearing account (similar to bank accounts)
Can be used as a long term investment and based on your risk tolerance, invest in the stock market
Additional Retirement Account
After age 65, the HSA can also be used as a retirement account.
Will be treated similar to a Traditional IRA. When withdrawals are made you will only pay income tax.
Unlike Traditional IRA’s, you are not required to make withdrawals at age 72