Are you looking for a financial tool that can help you take control of your healthcare expenses and invest in your future? Look no further than a Health Savings Account (HSA). With UMB Healthcare Services currently managing 1.4 million HSAs, and the market projected to reach 39 million accounts holding $142 billion in assets by the end of 2024 according to the 2022 Midyear Devenir HSA Research Report, there’s no better time to learn about the benefits of being an HSA accountholder.
So, what exactly is an HSA? It’s an individually owned, tax-advantaged account that can be used to pay for qualified medical expenses or to save for retirement and long-term care expenses. In 2023, the maximum contribution amount for HSAs is $3,850 for individuals and $7,750 for family coverage, with an additional $1,000 contribution allowed for those over 55 years old. To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP), not enrolled in any part of Medicare, not claimed as a dependent on another’s taxes, and not have any other non-permissible health coverage.
One of the unique benefits of an HSA is its triple tax advantage. Funds going into the account are tax-free, as are funds earned from interest, and funds and investment earnings withdrawn for eligible medical expenses are also tax-free. Unlike a Flexible Spending Account (FSA), which is sponsored by your employer and subject to forfeiture at the end of the benefit year, the money in your HSA is yours to keep, no matter if you change jobs or retire. You can also roll over your entire unspent amount year after year, and many HSAs calculate, compound, and credit interest monthly.
If you’re interested in opening an HSA, check with your employer during annual enrollment, or look for an HSA provider that partners with your insurance provider or personal bank. Once you have an HSA, there are a few strategies you can use to maximize its benefits. In your first year, you might focus on spending or minimally saving, while in later years, you can increase your contributions and invest more.
Whether you are new to HSAs or have had an account for several years, it is a great time to better understand all your HSA offers and plan ahead for financial well-being. Financial tools, like HSAs, offer flexibility and give you the power to better prepare for your financial future. Be sure to speak to a trusted financial advisor to see how an HSA could help you reach your financial goals.Â
