By: Joseph Hanson, JD EA
Health Savings Accounts (HSAs) are one of the most underrated and least discussed savings vehicles on the market today. And also one of my favorites!Many people confuse HSAs with FSA. But unlike the Flexible Savings Account, the amount you contribute to an HSA is yours forever.Here are some benefits to HSA’s.
1.) Contributions to HSAs are tax deferred meaning they function similarly to an IRA or 401(k). The money you contribute is not taxable up to the contribution limits
2.) Withdrawls for medical expenses, or long term care are tax free, meaning that upon withdrawal for medical purposes they function like a Roth.
3.) Further funds withdrawn after 65 for any non medical reason are only subject to regular income tax and not penalized, effectively turning your HSA into a traditional IRA or 401(k).
4.) HSA Contributions are not subject to income limitations like some other retirement accounts.
5.) HSAs can be invested in the market like any other account.
6.) When used appropriately and for the right client an HSA can be used as an additional retirement account.
7.) HSA Medical Plans typically have lower premiums because the have higher deductible.
HSAs are not for everyone, but if you can carry the risk of a higher deductible medical plan and you are looking for an additional retirement account to fund, an HSA is a great solution.