Saving With Health Care Savings Accounts
Now that tax season is behind us, it’s time to start thinking about future savings. A great way to do this is by checking out the eligibility requirements for a Health Savings Account (HSA).
What is a Health Savings Account?
It is kind of like a personal savings account. The program was designed for individuals who have high-deductible health plans.
How do you enroll?
HSAs can be set up on your own or through an employer, although not all employers offer the program. Naturally, IRS rules regarding contribution limits can change from one year to another, but the 2014 calendar year maximum contribution is $3,300 for individual coverage and $6,550 for family coverage.
Some possible HSA benefits to qualified participants?
- Within the confines of the guidelines, you choose how much money you want to go into the account for future medical costs.
- You decide which doctor to see; thus, managing the way the money is spent.
- Even though an employer may set up the account, the money is yours to use as you choose.
- If you’re self-employed (or on your own) and decide to contribute $2,500 to the account, the money is tax-deductible. If you work for an employer, pretax money is used. Again, this only applies when the funds are spent on eligible medical expenses.
- Unlike a Flexible Spending Account (FSA), you can carry over unused monies to the following year. NOTE: Flexible Spending Accounts are also tax savers, so you may wish to find out if your employer offers this type of program, as well.
- If you leave your employer, you can take your Health Savings Account with you: this is not the case with a Flexible Spending Account.
And potential negatives?
- The plan does not make sense for people who seldom pay out-of-pocket health care expenses. For example, some individuals have a high-deductible insurance plan but rarely visit medical practitioners.
- You might feel pressure to use the money. This could result in unnecessary trips to a physician’s office or other covered practitioner.
- If your employer contributes to your HSA, you still must adhere to the same contribution limits.
Okay, so is this type of account a good deal? It is if you tend to spend your hard-earned money on high deductibles. Why not save some cash if you meet the requirements?
For additional information, go to http://www.kiplinger.com/article/insurance/T027-C000-S002-health-savings-accounts.html