Why HSAs are becoming one of the most popular ways to save for medical expenses.
Health insurance can be hard to afford. Even with coverage, an unexpected illness or injury can be enough to change your financial fortunes. A Health Savings Account (HSA) is a special type of account designed to help with both of these issues. And it is one of the best options available to help you afford medical expenses.
If you haven’t considered an HSA yet, now is the time. Here’s a rundown of how it works, who qualifies, and five reasons why an HSA might be right for you.
How HSAs work
An HSA works similarly to a 401(k). Money is deducted from your paycheck pre-tax and deposited into your HSA. Unlike 401(k)s, money in HSAs can be withdrawn tax free at any time to pay for qualified medical expenses. That means an HSA gives you tax-free savings to pay for medical expenses. Your HSA funds can also be used for your spouse's and dependents' medical costs.
There’s no time limit on when the funds have to be used. So, the money in your HSA can be invested and can grow tax free until you need it. This makes HSAs an important tool for affording medical expenses now, and a great way to help prepare for medical expenses you’re almost sure to face in retirement.
If your employer offers an HSA, you may qualify to set one up through work. You can also set up an HSA on your own through Bank of Colorado. We also offer an HSA investment platform that allows you to invest your HSA dollars in mutual funds.
Who Qualifies for an HSA?
There are no income caps on who can benefit from an HSA. To qualify, you need to have a high-deductible health plan. A high deductible plan is health insurance with a deductible of at least $1,300 for an individual, or at least $2,600 for a family. There are a few other regulations, so it’s best to check with your health insurance company to make sure your plan qualifies before opening your HSA.
If you're covered by Medicare or Medicaid you can’t contribute to an HSA, but you can still use HSA funds you previously saved for medical expenses.
What Healthcare Expenses Qualify for Tax-Free Withdrawals from an HSA?
- Vision care
- Dental care
- Health insurance deductibles
- Most medical expenses
Five Reasons why an HSA Might be Right for You
- You have a high deductible plan.
- You’re looking to lower your monthly health insurance costs by switching to a high-deductible plan.
- You are already using an account like a 401(k) or IRA to save for retirement and are looking for an additional tax-advantage way to save for future medical expenses.
- You earn too much income to contribute to other tax advantaged accounts like an IRA.
- You know your medical costs are likely to increase in the future, so why not save for them tax-free?
Bank of Colorado can help you to open your HSA
Ready to take advantage of this valuable tool to help manage growing healthcare costs? Contact your local Bank of Colorado branch today, or visit www.bankofcolorado.com/personal-investing/hsa to learn more.