How much do you know about health savings accounts (HSAs)? Or maybe I should put it this way: how well do you know the terms and conditions of your health savings account? Well, while this remains a thorny topic eliciting mixed reactions and sparking global debates, what most of us do not realize is the fact that this account is diverse and dynamic. It encompasses some of the most advantageous control mechanisms which see all its members reap full benefits. However, did you know that there are some secrets you might not be aware of about health savings accounts even as a member? And yes, there are so many benefits that come with being aware of these secrets. Come with me as I delve into some of these secrets.
1. The HSA is tax-favored
A health savings accounts (HSA) is tax-favored and provides huge benefits to its holder as far as tax deductions are concerned. It offers immunity against huge tax contributions and offers an opportunity for one to make huge savings. In fact, this is one reason that makes it less of an insurance account and more of an investment and savings platform. At Mountain West IRA you can partner your IRA and HSA to reap the benefits of investing in alternative assets! Yes, you can have a return from your investments come to your HSA.
2. It is always used in conjunction with HDHP
An HSA works closely with a High-Deductible Health Plan (HDHP) to provide a favorable environment for its members. A connection between these two platforms provides huge benefits ranging from secure saving to huge investment opportunities. This combination also brings on board numerous other benefits like tax-free contributions and tax-free withdrawals for medical expenses.
3. HSAs require a custodian or trustee
While this HSA is more of a savings account, it requires one to bear an IRS-approved Trustee before they can open it. This is in order to act as a security in case the account owner defaults in honoring the stipulated rules and regulations which govern all the account holders. With the huge legal requirements associated with HSA, a Trustee is critical if any new member is to be allowed to join. When choosing a Trustee have in mind what your goal for the account is. You can use your HSA for the medical benefits, you will then want to choose a Trustee that has a debit card option. As many Mountain West IRA clients prefer, you can use your HSA as a nest egg and maximize your profits by investing in alternative investments for later use.
4. HSA holders are the decision makers
All account holders are bestowed with a responsibility to make all decisions on how to spend the cash and where to spend it. Your HSA funds do not disappear or become taxable at any point, this is an account for your health savings. The holder is also mandated to make themselves conversant with all legal implications of their activities at any given time. And yes, the account owner also needs to be aware of rules and regulations stipulated in the agreement.
5. HSAs are more affordable than other insurance covers
With the combination of an HDHP and HSA, the entire platform is made more affordable than all other traditional insurance coverage. In fact, those who cannot afford the traditional insurance premium opt to go for HSA given its affordability. With the premium increase in Obamacare some have found HDHP and HSA plans are the way to maximize their funds for their health savings. The potential new changes in healthcare under the Trump Administration may begin to favor the HDHP and HSA option even more.
6. HSAs provide for pre-tax contribution
HSAs provide for pre-tax contributions which in turn mean that the holder of the account does not have to make previously taxed contributions. The consumer benefits from pre-tax contributions AND no tax upon distribution for medical expenses. This is quite an impressive measure given the fact that we all strive to reduce the amount of tax we pay at any given day.
7. HSAs allow for rollover and transfer funds
HSAs allow rollover of funds from another retirement account one time. It also allows for transfer of funds from a previously established HSA. When planning for retirement, your goals will often change with age. HSAs allow the flexibility to transfer Trustees without a taxable event. While most other insurance platforms result in loss of all funds upon expiry of a contract, HSAs allow for more options. Isn’t that impressive?
8. Your HSA can pay for the owner’s spouses and dependents
HSAs can pay for owner’s spouses and his/her dependents is the owner has a family High-Deductible Health Plan (HDHP) plan. HSAs have a single option and a family option. The single option requires a HDHP Plan with a minimum deductible of $1,300 and a maximum deductible of $6,550, the owner can contribute up to $3,400, if over 55 years of age the owner will have the option of a catch-up of $1,000. The family option requires a HDHP Plan with a minimum deductible of $2,600 and a maximum deductible of $13,100, the owner can contribute up to $6,750, if over 55 years of age the owner will have the option for a catch-up contribution of $1,000.
9. HSA Custodians provide checks and credit cards
Some HSA Custodians provide debit cards which puts the decision on spending squarely on the owner. The account owner uses this debit card to decide on how to spend their funds. They are only required to provide a proof that they used the funds in for medical expenses.
Mountain West IRA will provide checks upon request. Our HSAs are ideal for the individual that would like to use their HSA to increase their investment options or at a later date.
10. HSA owners can use funds for retirement
Unlike most other platforms, one can use the HSA funds tax-free when they retire at the age of sixty five. This means that this account can act as a long-term savings plan. It also means that this account has tax-free contributions, similar to a Roth IRA, but even better because if used for a medical expense at any point a distribution is tax-free. Then, at age 65 all funds are tax-free for any reason. You can choose to convert your HSA to a Roth IRA at the age of 65 or completely distribute your account tax-free!
While there exists numerous other HSA surprises, listed above are basic ones which each and every account owner ought to be aware of. Always speak to a registered tax professional to find out if this may be the route for you.