Health Savings Account (HSA)

Health Savings Account (HSA) – Should I Get One?
For people who are tired of the high cost of health insurance, starting a Health Savings Account (HSA) is a great option for consideration. Some don’t even carry insurance because they have the ability to self-insure. It only takes one catastrophic event to put you in the hospital and drain you financially. A health savings account (HSA) is an excellent tool that gives you portable health coverage at a low monthly cost, tax reduction, and tax-free savings.

Lower you health insurance premium
One requirement of an HSA is that you carry a high deductible health plan (HDHP). So, the higher the deductible, the lower your monthly premium. In most cases, your monthly premium can be lowered by at least 25% up to 50% and higher depending on the cost of the health plan you have currently.

Make your insurance plan portable
Most people have health coverage through their employer. This has been a great benefit for many years and has enabled employers to attract and retain talented employees. Some, however, find themselves staying with a job they are not satisfied with simply because of the health plan. By taking control of your own health plan, you gain a certain amount of freedom in knowing that you don’t have to stay in a job for fear of losing your health coverage.

Reduce your taxes
Contributions to your health savings account are 100% tax deductible. For every dollar you put into your account, you reduce your taxable income. Since your taxable income is reduced because it is being sheltered in an HSA, that eases your tax burden every April 15th. In addition, all health savings account distributions are tax-free as long as the funds are spent for covered expenses.

Build savings
Possibly the best benefit of a health savings account are the savings you can build over time. HSA contributions can be invested in an FDIC insured account or in a wide variety of investments including mutual funds, stocks, or bonds that will earn even higher interest rates. Interest earnings in an HSA are also completely tax free. Once you retire, you can use the account for ANYTHING tax free.

Consider the possibilities
If a family of 4 started an HSA and contributed the maximum allowable each year (currently $5450) invested at 4%, they would have a net gain of approximately $681 at the end of year #2. So what? That gain is what you would have left over after you subtract the annual premium and $1,000 in medical expenses from interest earned. What happened? In essence, your insurance coverage cost you nothing.