The need for healthcare is growing at a rapid pace. That pace is increasing due to the fact that the baby boomer generation is nearing retirement age. The truth is that paying for healthcare is a huge burden for many Americans. For many people, a majority of their income goes towards paying for medical care and prescription drugs.
However, there are ways to make healthcare more affordable. One strategy is to start a Health Savings Account, also known as an HSA for short. Below is an overview of just some of the benefits of starting such an HSA.
They’re Widely Available
It’s a misnomer that you have to own a business to obtain an HSA. You simply have to obtain the right kind of insurance coverage. Also, it isn’t mandatory that your employer has to set up the account to contribute to it. Their insurance simply needs to qualify for an HSA.
You Get a Big Tax Deduction
The reason most people set up Health Savings Accounts is to take advantage of the generous tax deduction they can trigger. HSA contributions are deductible from your gross pay on your IRS tax forms. The deduction can be so large that it often places people into a lower tax bracket.
The Funds Grows Tax Free
Once funds are placed in the account, they grow over time. That growth isn’t taxed by the government. You can invest the funds to grow the account and won’t have to pay taxes on those investments. The funds can then be kept in the account for future healthcare needs. You won’t be penalized for not using them either.
Qualified Medical Expenses Are Tax Free
As long as the funds are spent on qualified medical expenses, you will not be taxed for withdrawals. This doesn’t only include medical expenses stemming from your primary care physician. It could include paying for things like dental crowns,eye exams, chiropractic appointments and even acupuncture.
You Can Self Direct the Investments
In regards to how you invest the funds inside your HSA, you can have a lot of control. You don’t have to give over control of what the funds are invested into via a bank mutual fund. The option to self direct the investments is available if you list a custodian for the HSA.
Overall, Health Savings Accounts can be a great healthcare solution for many people. They allow you to save for healthcare expenses, grow the funds via investment and obtain large tax deductions. Certainly consider whether or not you would benefit from an HSA.
By Kara Masterson
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