For those looking for a better way to pay medical expenses, a Health Savings Account (HSA) can be a fantastic option. This type of savings account offers unique benefits, including advantages for retirement.
This article will go through what an HSA is, who should consider one, and how to get the most out of using one.
What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is tax-advantaged account that can be used to save for medical expenses. Contributions, earnings, and distributions to/from an HAS are not taxed.
Additionally, an HSA can be offered through an employer who then may match any contributions. Another advantage is that any unused account balances at end of year can be carried forward.
HSAs are particularly attractive to those who have no other health insurance or a high-deductible health plan.
That being said, an HSA does have some limitations. Firstly, to qualify for an HSA, you must meet eligibility standards set out by the Internal Revenue Service (IRS):
- You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
- You have no other health coverage (except what is permitted under Other health coverage)
- You aren’t enrolled in Medicare.
- You can’t be claimed as a dependent on someone else’s 2021 tax return.
Additionally, there is a cap on contributions each year. The cap fluctuates from year to year and your specific HSA and health coverage, but as of 2022, the cap was up to $3,650 for individuals and up to $7,300 for families.
HSA and Retirement
By far the biggest advantage of an HSA is that – even if it’s originally created by an employer – it belongs to you. If you change employers or retire, the account stays with you. And because you can transfer over unused balances at the end of each year, you can easily build momentum and savings.
For retirees, this presents an advantage. Medicare may not cover your needed health expenses – but having an HSA gives you a pool to pull from for any necessary medical expenses. This can also be advantageous for medical equipment like hearing aids, wheelchairs, and walkers that can be very expensive.
Get the Most out of an HSA
Our financial advisors at Greater Midwest Financial Group are committed to helping you balance your present and future finances so you can live comfortably and confidently well into the future.
To learn more about HSAs and how you can benefit, contact a professional at Greater Midwest Financial Group today.
Greater Midwest Financial Group is a financial advisor firm serving St. Paul, Minneapolis and the wider Twin Cities area. We specialize in wealth management, retirement planning, asset management and other personal finance needs.
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