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HSAs

Taking a Closer Look at HSAs

Are Health Savings Accounts Right For You?

Due to today’s changing healthcare environment and increases in insurance deductibles for many individuals, understanding all of your healthcare options has never been more important. One option that might be helpful to you is a Health Savings Account (HSA).

The HSA Story

According to the Department of Treasury, “HSAs were created in 2003 so that individuals covered by high deductible health plans (plans with minimum annual deductible requirements of $1,250 for an individual and $2,500 for a family, as of 2014) could receive tax-preferred treatment of money saved for medical expenses,” such as deductibles and co-pays. Generally, an adult currently covered by a high-deductible health plan, that has no other “first-dollar” coverage (healthcare coverage without deductibles and co-pays being paid first), may establish an HSA.

The PROS
  • Tax Deductible Contributions – You can make annual tax-free contributions to pay for current and future health care costs. In 2014, an individual can save up to $3,300 and a family can save up to $6,550. People age 55 and older are allowed to save an additional $1,000 annually, totaling a savings limit of $4,300 each year for an individual and $7,550 for a family.*
  • Any money not spent for designated health care expenses rolls over to the next year and continues to grow tax-free.
  • Many employer-sponsored HSA plans allow the employer an option to provide a contribution to the HSA. The money is often treated like a 401K plan and taken out of your paycheck on a pre-tax basis.
  • Anyone can contribute to an HSA, including spouses, parents, and even friends.
  • In addition to help off-set deductibles, HSAs can help build savings to cover unplanned healthcare costs or even the out-of-pocket healthcare expenses people are likely to have in retirement.
The CONS
  • If the money in your HSA is used for anything other than defined medical expenses, you will be subject to taxes; and if you’re not 65 years old, you’ll pay an extra 10% penalty.
  • Predicting your overall health condition and healthcare needs can be unpredictable, making it hard to accurately save and budget for healthcare expenses.
  • It may be challenging for those who are older and/or unhealthy to save as much as younger or healthier people.

For additional information, find more HSA information on our site. Or, give us a call. We’d love to help answer your questions.

*Consult your tax advisor to discuss your financial situation.