What are the benefits of an HSA?
Health Savings Accounts (HSAs) can help pay for eligible medical expenses for people enrolled in High Deductible Health Insurance Plans (HDHP). When you’re no longer contributing to the HSA in retirement, it can supplement your Medicare Supplement Insurance policies by helping you manage your out-of-pocket expenses. In addition to paying expenses, you can also use an HSA as a means of saving. Here are six ways to get the most out of it:
- It reinvests the remaining funds from one year to the next. Yes, you can do it indefinitely. The interest accrued on your savings balance is tax deferred.
- Contribute until tax filing day. If you haven’t reached the annual contribution limit, you can contribute until your tax filing date the following spring.
- You can move the funds if you want. Your employer may have created your account when you signed up for HDHP. However, if you prefer to use a different HSA, you can arrange to transfer the funds. (An HSA is completely yours, regardless of whether a current or past employer sponsors it.)
- Maximize your contributions. Contribute the annual limit so you can claim the maximum tax deduction. If you are 55 years of age or older, you can also make a contribution to catch up.
- Invest with your HSA. Some HSAs allow you to invest the money in mutual funds and stocks, which can generate a higher return. You may need to keep a minimum amount, but if you can cover it, it is an option to consider.
- Wait to meet your deductible. If your medical bills are infrequent or if you can cover the costs, let your savings continue to grow tax-deferred in the HSA. (If you pay some expenses yourself, save your receipts so you can request refunds once you’ve met your deductible.)
With a health savings account, the money you save in an HSA is yours. You control how the money is spent and maintain the interest and investment earnings on the account.