Wednesday, March 27, 2013

Is a Health Savings Account for you?

The question of whether an HSA is right for you can be answered with: "It depends." If you already have a high-deductible health insurance policy (individual or family), adding an HSA is a good idea. Also, it may be a good bet if you are in good health and if you've been paying more for health insurance premiums than you've been using in health care. People with chronic diseases, such as diabetes, requiring frequent doctor visits and medication, may need to think twice about enrolling.

Advantages:

·        Invest pretax money to fund them; withdrawals are tax-free (assuming they are used for medical expenses).
·        Invest in a variety of financial products, such as mutual funds and stocks, and contributions can be rolled over from year to year.
·       You can save up for when you really need the funds for a medical expense. 
·       Take out your money at any time to reimburse a medical expense.  
·       There is no time limit as in the traditional “use it or lose it” FSAs.   
·        Savings this year can offset a medical expense next year or the year after.

Disadvantages:

·         You must enroll in a health plan with a high deductible and high out-of-pocket maximums to open one.
·         Penalties and taxes are assessed if a HSA is not used for health care expenses.

David Prusaitis, CPA, CVA

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