Health Savings Accounts Explained

Health Savings Accounts Explained

What is a Health Savings Account?
Increases in the cost for health care and health insurance now impact both employees receipt their health insurance through an supervisor group plan and the self - assiduous seeking individual and family health insurance. Whichever group you fall into, you’ve commonplace noticed the rising costs of health insurance. Deductibles and other out - of - pocket expenses have risen to the point that, without careful planning, they can put a serious financial strain on the average American family. In December of 2003, the government took steps to ease the burden on working people when it comes to paying for their health care. The resulting legislation common the Health Savings Account.
A Health Savings Account, or HSA, is an account that allows you to save your pre - tax money for out - of - pocket medical expenses. Unlike a flexible spending account ( FSA ), any money down over at the end of the year can be saved and used for following years. The money may also age through investments, just equaling the funds in an IRA, depending on how and where you secure your account.
Health Savings Accounts are specifically designed for people with high - deductible insurance plans who do not have any other first - dollar medical coverage. Coverage specific to injury, miracle, disability, dental, vision and long - term care insurance is permitted, however, without affecting eligibility for an HSA. Exceptions are those eligible for Medicare ( over 65 ) and anyone who can be claimed as a dependent on someone else’s tax return. Individuals in these categories will not be able to open a Health Savings Account.
How to Create a Health Savings Account
Your bank, credit union, and insurance company are a few places that can serve as trustees for your Health Savings Account. Any financial arranging that handles IRAs or Archer MSAs may also offer the accounts. Once the account is set up, you and / or your manager may make regular deposits up to your allowed place amount. This amount is fixed by the size of your annual health insurance deductible.
Once you’ve acknowledged the account, you’ll have a great deal of prerogative. You can choose to use the money for all or part of any adept out - of - pocket medical rate. Expert expenses compass from co - pay and deductible amounts to prescriptions and even over - the - counter drugs approximating as aspirin and cold medicine. Insurance premiums much are not approved; however, premiums for dental, vision, disability and long - term care may be eligible.
Health Savings Account Funds
The coinage in the account belong to you and can be crimped over into some other tax - advantaged accounts allying as an IRA if you so choose. You can use the funds for expert medical expenses until you turn 65. You can also draw on your funds at any time for non - medical expenses; however, you will have to pay income tax on the amount as well as an supplementary 10 % right for withdrawing the funds for non - medical purposes. After you grasp age 65 you must withdraw the funds or roll them over judicature - free.
How you use your HSA is up to you. You may view it as a way to save in the short term to pay for your out - of - pocket medical expenses year to year, or you may decide that you’d reasonably use the account to accumulate funds toward the medical expenses you’ll incur in your retirement before age 65. Either way, the HSA is a new resource that may make the cost of health insurance less burdensome.