Benefits of health savings accounts

 The health savings accounts (HSA for short) have generated much excitement recently and rightly so. With rising health insurance, many companies are cutting costs by offering the alternative that has a high deductible for employees.

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HSAs are mainly used to help pay medical expenses with tax-free money, but can only be set if you have a health plan with a high deductible and supports that option.

There are many other benefits: the funds in those accounts you do not use for medical expenses can accumulate for retirement as an individual retirement account or "IRA". In other words, there is no deadline to use funds from the HSA.

A striking feature of an HSA is that once the account is set up and funded with only $ 1, you can expect to know exactly how many are your medical expenses to make deposits on the account; get a tax deduction for the deposit and pay for medical expenses with tax-free money.

For example, David and Mary have a health insurance plan with a high deductible by the employer of David, which is compatible with an HSA. On March 1, Mary learns she is pregnant. They are not sure how much you will pay for delivery. David can immediately establish an HSA plan and depositing only $ 1. Any medical expenses after the date the account is established, can be paid by it. So when the couple get your hospital bill for an amount of $ 3,000, you can deposit that amount in the HSA, get a tax deduction for the deposit and pay the hospital bill with tax-free money.

It is important to note that if you withdraw money from your HSA for other than medical expenses, you will have to pay taxes on the same distribution and if you are under 65 years of age, will also be subject to a fine.

Making the most of HSAs

To get the most benefit from an HSA, a family would contribute the maximum allowed each year. For 2016 the maximum is $ 6.750. If you have medical expenses, they may pay the account, but if you do not use it for that purpose, they can leave the money accumulated in the account and the benefit will be free from paying taxes.

With the maximum annual deposit of $ 6.750 plus interest or investment earnings, the HSA can help a family to accumulate almost $ 150,000 in the course of 20 years. This can be used to cover medical expenses during retirement and the best part is that you get a tax deduction for contributions each year.

The Human Resources department of your company can be a good starting point to help you determine if your health insurance is a high-deductible plan, if it is compatible with an HSA and can give you details on the establishment and financing of the same . If your health plan is independent, it is a good idea to check with your insurance provider or financial adviser.