Opening a Health Savings Account (HSA) could be the best healthcare and retirement planning decision you ever make.
Health Savings Accounts and like nothing else in existence when it comes planning for managing healthcare costs – now and in the future.
The Power of an HSA is so unique, just take a look at the HUGE key features:
• Money you contribute is income TAX FREE !!
• Money grows in this account TAX FREE !!
• Money in your HSA used to pay for qualified health expenses is TAX FREE !!
• Money in your HSA is yours and yours only – and HSA account belongs to you and is with you through job changes and throughout retirement
But as good as those points are – harnessing the true and total power of Opening a Health Savings Account is what you should get excited about.
Choose the best HSA administrator so you have an expert to speak with anytime you have a question. Sure, you see the advertisements for “free HSA” at banks and credit unions –but try asking the bank teller about a “Qualified Medical Expense”, am I able to use my HSA funds for this expense? Well, they won’t be able to help you and it’s not because they don’t want to – it’s not their business they are not healthcare experts they are bankers.
Choose an HSA administrator that offers an account that allows for investments. Want to see that money grow – good HSAs allow you to move your money into investments, similar to a 401K.
• Pro tip – put your entire years HSA contribution as early in the year as possible so it maximizes the amount of time you are gaining interest or investment growth.
• Take advantage of any matching dollars your employer may offer
• If your employer offers payroll deduction contributions take advantage
Make sure your HSA account offers a debit card so if you want to spend some of your HSA money on a qualified expense you don’t have to pay out of pocket – it just makes accessing your HSA account convenient.
HSA accounts are not like FSA or Flex accounts you may know through a job. There is NO use it or lose it – your HSA account belongs to only you, follows you for life, and the balance rolls over for life. It is a bank account that no one has any control over other than you.
HSAs are not scary and are not a tax filing hassle. The Health Saving Account is a tool the IRS allows for healthcare saving and planning – if you make a mistake or purchase a non-qualified item or service you simply square up with your TAX filing – that amount would then be recognized as taxable income and there a penalty fee (or you simply deposit that amount back into your account). You are not going to get in trouble, you simply correct the error at tax time.
When it comes time to retire – and if your planned right and probably lucky – maybe you don’t need all the money you saved in your Health Savings Account for medical expenses – well in that case your HSA can be treated similar to an IRA and any withdrawals would be treated as ordinary income – at your retirement tax rate. You can’t lose!!
Not everyone can contribute to an HSA you have to meet certain qualifications – the # 1 being – having an HSA qualified High Deductible Health Plan. (see chart below). With all that said, part of your healthcare planning should include the HDHP for access to the Health Savings Account.
The IRS has announced 2019 HSA contribution limits as part of the release of Revenue Procedure 2018-30. The limits are:
|Self-only HSA contribution limit||$3,450||$3,500|
|Family HSA contribution limit||$6,900||$7,000|
2019 High-Deductible Health Plan (HDHP) deductible amounts and out-of-pocket expense limits were also announced:
|HDHP (self-only coverage)||2018||2019|
|Annual deductible not less than:||$1,350||$1,350|
|Annual out-of-pocket expenses don’t exceed:||$6,650||$6,750|
|HDHP (family coverage)||2018||2019|
|Annual deductible not less than:||$2,700||$2,700|
|Annual out-of-pocket expenses don’t exceed:||$13,300||$13,500|