There are so many tax-advantaged account options (403b/401k, HSA, FSA, etc.), that it can be difficult to decide which account offers the best bang for your bucks. If you’re in a high-deductible health plan (also known as an account-based or HSA plan), here are 5 reasons you should consider contributing to a Health Savings Account (HSA).
Save triple on taxes
As long as you spend the balance for qualified medical expenses,1 using an HSA offers a triple tax benefit, allowing you to save on:
• Contributions—Money you contribute is tax free.
• Withdrawals—Money can be withdrawn without paying taxes.
• Earnings—Any interest and earnings are tax free.
Plus, HSA balances over $1,000 can be invested, offering the potential for growth over time.2
Keep it indefinitely—even through retirement
Once you contribute to an HSA, the money is yours—even if you change to a different health plan or leave your job. It can also be rolled over indefinitely, unlike flexible spending accounts, which have a "use-it-or-lose-it" provision. If you keep money in your HSA into retirement, it is not subject to required minimum distribution (RMD) rules, so you aren’t forced to take money out until you are ready to spend it.
Use it for your whole family
Your HSA can be used to pay medical premiums or medical expenses for anyone you claim on your taxes—even if they aren’t covered on your medical plan. If you retain the account until retirement, you can use the funds for any expense as long as you pay income taxes like you would with a retirement savings account (e.g., 403b or 401k).
Be prepared for the expected—or the unexpected
When you fund your HSA to cover expected medical expenses, the tax benefit is like getting a discount equal to what your tax rate would be. Who wouldn’t want to save $100 on a $400 procedure? Plus, you can change the amount you contribute to an HSA at any time during the plan year without a qualifying reason. So after an unexpected trip to the emergency room, instead of dipping into savings or incurring debt, you could put your payments on a plan and fund your HSA to pay the bills at a discount.
Supersize what you set aside
You can fund your HSA with up to $3,500 a year ($7,000 family limit) for 2019. You can add up to $1,000 more if you are age 55 or older. Plus, HSAs can be combined with limited flexible-spending accounts (FSAs) that cover dental and vision expenses.
To learn more about how an HSA can fit into your overall financial planning, read the article in the January 2018 Hark newsletter. You can also contact EY Financial Planning Services for a consultation for no additional cost to you at 1-800-360-2539.3
If you are a HealthFlex participant, learn more about your HealthFlex HSA options at HealthFlex/WebMD under “HealthFlex Details and FAQs.”
1 Qualified expenses are covered in IRS Publication 502 available at irs.gov/pub/irs-pdf/p502.pdf.
2 This benefit is available in HealthFlex. Check your plan document to determine availability.
3 Costs are included in Wespath’s operating expenses that are paid for by the funds. Services are available to active participants and surviving spouses with account balances, and to retired and terminated participants with account balances of at least $10,000.