Investing in a personal savings account has many benefits. Major life events, such as paying for college tuition or retirement, are probably at the top of your list of reasons to save. Due to the rising costs and uncertainty of American health-care, you may want to think about opening a Health Savings Account.
What is an HSA?
A Health Savings Account, or HSA, is tax-advantaged account you can use to pay qualified medical expenses. All contributions made to an HSA are tax deductible and there are no income or phase-out restrictions. As insurance premiums and deductibles rise, the need to save specifically for medical costs becomes greater. HSAs are rapidly gaining popularity with the self-employed and small-business owners.
To open an HSA, you should:
- Be currently covered by an HSA-qualified high-deductible health plan (HDHP)
- Not be claimed as a dependent on someone else’s tax return
- Not be enrolled in Medicare
- Not be covered under another non-HDHP, unless it is permitted insurance
HSAs enable you to lower your health insurance premiums by purchasing higher-deductible plans. You can tap into your HSA to pay for any “qualified medical expense,” including doctor’s visits, prescriptions, dental/vision care, and over-the-counter drugs. Some additional perks to investing in an HSA are listed below.
- Employers can make contributions on behalf of their employees
- Interest is tax free, and the savings can be invested in a wide variety of mutual funds
- HSA funds never expire
- Individuals aged 55 and older can make catch-up contributions
- HSAs are portable — if you leave your job, your HSA goes with you
- Once you reach Medicare eligibility age (currently age 65), you can take withdrawals from your account for any reason, not just for medical expenses.
- Your HSA can be passed along to your surviving spouse or to your beneficiary or estate
Use our online calculator to find out how a health savings account and high-deductible health plan compares to a traditional insurance plan.
Contact your Fifth Third Bank advisor for further assistance on HSAs.