The cost of medical care can quickly become overwhelming when you are facing an emergency or a chronic illness. October 15 is National HSA Awareness Day, and for good reason. An HSA is one of many worthwhile options for how to minimize your risk of having medical costs bankrupt you (whether literally or figuratively). In short, an HSA sets aside pre-tax funds from your paycheck into an account which can be used as needed for medical costs. Let’s look briefly at why this may be a good idea for you:
It can literally SAVE YOU HUNDREDS OF DOLLARS a year. Let’s say you’re spending $2000 a year in doctor visits, glasses/contacts, dental work, and prescriptions. By using pre-tax dollars, calculators estimate that you could save about $500 over the course of a year. For an easy HSA Tax Savings Calculator click here.
2. Peace of Mind
It can be PEACE OF MIND, knowing funds are immediately available to pay the bill. If you struggle with establishing and maintaining a payment plan, then having an HSA card to immediately pay for the cost can be a stress reliever.
3. Changes Your Taxable Income
Using an HSA CHANGES YOUR TAXABLE INCOME so that you’re paying on less earnings. Depending on your tax bracket that could save you quite a bit come tax season. (Remember that the other side of that coin is that you’re paying less into social security, so if you cut back on your taxable earnings long-term and particularly toward the end of your employment years, it can affect your social security earnings.)
4. Retirement Savings
A true HSA (not FSA, see below), can also act as a SAVINGS TOOL for your retirement years. You can stockpile funds which grow tax-free until needed. Before age 65, you can use the funds for a wide variety of medical costs and after age 65, they can be withdrawn for any reason.
A few last take aways to tuck away…
- Check with your employer as to whether the plan is a Health Savings Account (HSA) or Flexible Spending Account (FSA) as there are a few key differences.
- With an HSA, you are restricted to certain insurance plans which have HIGH DEDUCTIBLES. Depending on the type and frequency of the medical services you receive, this could actually wind up being MORE costly, at least in the short term, than a lower deductible plan and traditional savings/payment plans.
- For an FSA, you have to reapply annually, and then utilize the funds within a certain period of time. Any funds not used during that period CAN EXPIRE and therefore potentially lose those set aside funds.
Still concerned about your finances and whether you have a sound financial plan? Let Apprisen come alongside you on the journey. We’re happy to help calculate together, design budgets, and answer questions that can help maximize your finances for the future. Contact us at 800-355-2227 to book a free session.
Happy National HSA Awareness Day