What is a Health Savings Account and Should I Open One?

If you have a High Deductible Health Plan for your health insurance, then you are eligible for a Health Savings Account (HSA). You can use HSA funds to pay for qualified medical expenses. These expenses can be incurred by you, your spouse, or any dependents listed on your tax return.

There is no need to submit receipts, but you do want to keep these as proof that you used the money for qualified medical expenses. This will come in handy should you ever have an IRS audit.

Advantages to Opening a Health Savings Account

  • Lower your taxable income. The money you put into the account is pre-tax. This reduces your taxable income you file your tax return.
  • HSA accounts earn interest tax free. This means you won’t have to claim the earnings as income on your tax return.
  • HSA contributions don’t expire. If you don’t use all the money in your account, then it can roll over to the next year. There is no need to “use it or lose it.”
  • You can invest your account into a variety of investments. There is no minimum requirement. Just remember that some investments are not FDIC insured, so there is a potential to lose money.
  • You can use your HSA as a retirement account. After you turn 65, any money in the account can be used for any purpose. It is no longer restricted to qualified medical expenses. This makes the account a potential retirement account.

If these advantages are appealing to you and you have a High Deductible Health Plan, then you may want to open an HSA. Saving for medical expenses, and having a great vehicle in which to do it, is an awesome idea!


Recommended Articles

How to Prepare for a Family Financially

Since we know that everything affects everything, let’s talk about how our financial lives are impacted by our families. Over 80% of SaverLife members live with at least one other person—be that a parent, child, partner, or roommate—and even if you are single, you may have heard that having a baby can really break the… Read more

How Can I Involve My Kids in Everyday Budgeting and Financial Decisions?

The home is the perfect place for kids of all ages to learn and practice personal finance. Here are some specific ways you can involve your kids in everyday budgeting and family finances, all while teaching important life lessons. Consult Your Kids When Making Your Monthly Budget Let your child know that you’re looking ahead… Read more

How to Plan for the Cost of College with Your Kids

As a financial coach, I encourage parents to talk to their children about college as early as possible. Nowadays, college is one of the most expensive costs, next to a car or a home. Enrolling, paying, and attending college is also a complicated process. Leaving this in the hands of an 18-year-old is unfair. Your… Read more