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what is an HSA?

a health savings account, also known as a HSA, is a type of investment account used specifically for medical expenses. HSAs are typically part of benefit packages for high deductible health plans (HDHP). ever see the commercials about health insurance with rock bottom monthly premiums? chances are they might be talking about HDHPs, which require you (the patient) to pay out of pocket until the deductible is met…then your insurance kicks in.

health savings accounts are attached to HDHPs to possibly make them a bit more attractive, because the payer has a way to offset their deductible costs or other medical expenses. it is a tax-advantaged method to stash some money away in case of a healthcare claim. the money may be deducted from your paycheck before taxes, helping to lower your taxable income amount; and if used for a qualifying medical expense, no tax is paid on the money. HSA funds also rollover every year, so you can continue to build up the account balance, and avoid any type of “use it or lose it” scenario. BE CAREFUL…HSA funds that are used improperly are subject to taxes and a 20% tax penalty.

do you have one?

this is something you have to check out on your healthcare plan summary and supporting documents. if you have health insurance through your employer, it’s a quick question your human resources office can answer. regardless, you want to check those documents to get all details on the HSA, and know your plan deductible assuming you have a HDHP. you’ll want to double check what is considered an eligible and ineligible expense. asking about your current healthcare plan, or new ones that may now be available, is probably good advice either way. it wouldn’t hurt to get a refresher on the details of the plan you’re in, or learn if others are now more suitable to your needs.

should you have one?

can you afford to put money into the HSA, then again…can you afford not to? this really comes down to a budgetary and personal decision. adding to an HSA, means less money coming to you from your actual paycheck but preparing for the future is rarely something anyone will advise against. if you and/or your family rarely visit the doctor, then putting a lot in may not make sense. there is an annual limit set by the IRS which can change from year to year, so be cautious of the current cap. it’s certainly something you want to talk over with a tax or financial professional.

disclosure: the ideas, thoughts, and opinions in this article are our own, except where sources are specifically cited, and are property of millennial financial planning. this article is intended for informational purposes only, and does not serve as direct financial advice. speak with your financial professional for direct advice and guidance. all investments contain risk and the potential loss of principal.

"health is wealth"

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