Find out if you will benefit from an HSA according to Health Insurance Agent, Michelle Bungo.
A Health Savings Account, or HSA, is a valuable tool to save for medical expenses while reducing your taxable income. In order to qualify for an HSA, you must be enrolled in a high-deductible health insurance plan (HDHP). The IRS sets the minimum deductible and the maximum amount that the plan holder can spend out-of-pocket for HDHPs. Plans with a high deductible don’t always guarantee that the enrollee will have access to a Health Savings Account. Michelle Bungo notes that if you want a health care plan with an HSA, make sure the plan is specifically labeled with an HSA option.
Each year, you determine how much you want to contribute to your HSA. If your employer has an HSA, you can set up automatic contributions directly from payroll. You will receive an HSA debit card linked to your HSA balance and this can be used on eligible medical expenses. Michelle Bungo lists examples of expenses including copays, deductibles, and other medical expenses that qualify on your HSA guidelines. Insurance premiums are typically not paid for by HSA funds.
An HSA is beneficial because money invested into the account rolls over from year to year. This is not the case for a Flexible Spending Account. Michelle Bungo says the largest advantages of having an HSA are the tax benefits. HSA contributions are pre-tax if it is through an employer or if you opened your own HSA, it is tax-deductible. Another tax benefit is that you don’t pay taxes on the account’s growth. This makes investing HSA funds more desirable. Also, when you make withdrawals on eligible expenses, you don’t pay taxes on those either.
As Michelle Bungo previously stated, the money in your HSA can be used for investing in mutual funds, stocks, and other investments. You can set the preferences of your investment strategy. Michelle Bungo recommends that you look for low-fee investment options with HSA funds and turn to a fee-only financial advisor.
Michelle Bungo says that many people will benefit from having an HSA, but an HSA is not for everyone. In order to qualify for an HSA, you must have an HDHP and this can create more of a financial burden on you than other types of health insurance plans. You do pay less premiums with an HSA, but it could become difficult to come up with the money for the deductible even with your HSA. If you withdrawal funds for non-qualified expenses before you turn 65, you will owe taxes on that money and suffer and 20% penalty. Another disadvantage of an HSA are the fees involved. Some HSAs charge a monthly maintenance fee or fee per transaction.
About Michelle Bungo:
Michelle Bungo is a licensed health insurance agent in Coral Springs, FL, with years of experience working with all major insurance carriers. Physical fitness is important to Michelle Bungo, which is why she works out regularly. You can catch her at the gym every week! When she’s not at the gym or office, Michelle Bungo spends her free time socializing with friends and neighbors or hanging out with her kids. She also has an avid love for music and frequently attends local concerts.