It can sound scary but a Health Savings Account (HSA) has a ton of advantages if you take the time to learn about all they have to offer.
A lot of people pass on an HSA because they are only included in high deductible health insurance plans. Those types of plans have high out of pocket costs for health care until you hit a deductible that is higher than you are used to. These plans usually don’t have co-pays, you just pay full price for a doctor or ER visit (although you usually still get some sort of insurance discount). Because of this you get access to an HSA which is an account you can keep forever and where unused contributions roll over each year.
Your contributions are pre-tax and withdrawals for qualified health expenses are also tax free. You can also invest a portion of your unused HSA funds into various investments options your HSA provider offers. Any funds you haven’t used by the time you hit retirement age can then be withdrawn and used for whatever you want.
The thing to consider is that you can pay for health care premiums and increasingly higher deductibles for “regular” health insurance that you may or may not use in any given year, or you can max HSA contributions. In certain years you may use a good chunk of those funds, but in years you don’t have a lot of health care needs, you’re banking money.
Health insurance is very complicated and varies from state to state and employer to employer so you need to as much research as you can to make decisions best for you and your family. However, don’t rule out a plan that includes an HSA because it looks unfamiliar. Do the math and consider it along side other options.
Learn more about HSAs and high deductible plans.
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