Three Things to Know About Health Savings Accounts
Many employers offering medical insurance and other benefits to their employees are including a health savings account as part of the complete benefits package options. A health savings account (HSA) is a tax advantaged account with contributed funds that the employee volunteers to add to the account, for use at a later date for certain qualified medical expenses. The main benefit of an HSA is the ability to contribute a portion of their salary with no tax penalities or rather tax free. Many individuals also like to view the HSA as an extension of their retirement account since there is typically no “use it or lose it” rule for standard health savings accounts.
HSA’s are Increasingly Popular with Employers
A benefit of the HSA for working seniors and baby boomers is the ability to open an account regardless of age. The number of employers offering health savings account as part of their benefit package is increasing dramatically each year. According to Towers Watson, a human resources firm, approximately 45% of large companies are providing an HSA option to their employees as opposed to 25% in 2007. There is a good chance that your employer will begin offering a health savings account in the near future, most likely during the next enrollment period. Like other insurance benefits, you must enroll in the HSA within a certain period of time and during your period of open enrollment, as specified by your human resources department.
You Must Have a High Deductible Insurance Plan
If you volunteer to contribute to a health savings account, you should be aware that the plan is for individuals with high deductible health insurance. This account was first offered by as a tax-free option for employed individuals with insurance coverage that carried high deductibles. To open an HSA you will be required to make a deposit that usually starts around $1,000 but may be more depending on the organization you choose to handle your health savings account. The account is not an insurance plan therefore your insurance company may or may not be the ones to handle the HSA portion of your health care plan. The deposit combined with the requirement of having to already have high deductible based insurance does leave some question in many seniors mind as to the worth of the account. If you plan to use the health savings account as a second retirement account, or you know your family can benefit from it due to a high number of medical issues, then it may be worth it to you to pay the deposit. Keep in mind the money you contribute is tax free and can roll over if it is not used during the year.
HSA’s Can Be Used As Retirement Accounts
Even if you don’t foresee a large number of medical issues such as doctor visits or prescription medications in the near future, you can still benefit greatly from contributing to a health savings account. There is no “use it or lose it” attached to a health savings account, so the tax free dollars you are contributing to your account is going to remain there until you need to access it. When you reach retirement age, you may have more opportunities to take advantage of the money you have set aside for qualified medical expenses. These advantages will be in the form of withdrawals or even closing the account and obtaining the money that is remaining in the health savings account for your own personal use.