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October 29, 2011
Why Health Savings Accounts Have A Loyal Following
One reason is that HSA earnings are not taxed as long as the money remains in the account. Withdrawals to pay for most health care expenses will not be taxed, either. Health care expenses for family members can be covered with an HSA even though those family members are not covered under the HSA-qualified high-deductible health plan.
The other tax advantage is that HSA contributions double as tax deductions regardless of whether the money is spent on health care. Up to the government-set maximum, HSA contributions are considered to be “above the line” deductions. That means you can take the deduction without itemizing deductions.
A third reason for the growing popularity of Health Savings Accounts is that they offer greater flexibility than traditional forms of retirement savings. HSA funds may be invested in bonds, mutual funds or stocks. They can also be placed in savings accounts to earn tax-free interest. At age 65, HSA funds may be used for any purpose with no penalty fee, but taxes will be due for withdrawals not spent on qualified health care.
Unlike IRAs, HSA funds can remain invested throughout retirement. If needed for health care, though, HSA money can be withdrawn at any time with a penalty. HSA funds are not "locked up" until owners turn 65, and HSA owners are not forced to liquidate investments.
HSA Plans also tend to offer lower insurance premiums, which just adds to the savings. Even for those in high tax brackets, basically the middle class, HSA-qualified plans that have slightly higher premiums may be offset by all the additional savings. To see whether an HSA Plan would fit your situation, you can learn more about HSA Plans with our extensive online resources.
Posted by Wiley Long at October 29, 2011 01:30 AM