Ever since the signing of the Affordable Care Act in 20-10 health savings accounts have become more popular and for many Americans they’re now an absolute necessity.As deductibles soared the need to offset those costs has also risen sharply enter the HSA. Today, financial planner and teacher Rob West explains how they can save you money now and decades into the future. Then it’s your calls at 800-525-7000.
HSAs are intended to help folks cope with high health insurance costs specifically high deductibles. Think of an HSA also as a qualified retirement account, like a 401k or traditional IRA, that you can tap into for health-related expenses at any time.
Not everyone is eligible for an HSA. You first must have an HDHP or High Deductible Healthcare Plan
For 2020, the minimum deductible for an individual policy is $1,400, for a family policy it’s $2,800. There’s also a maximum annual out-of-pocket expense requirement it’s $6,900 for individuals and $13,800 for a family.
The money you put into an HSA isn’t counted toward adjusted gross income on your tax return. So, when you use those funds for qualified medical expenses, you’re paying with pre-tax dollars.
There’s a long list of qualified expenses, including doctor visits,deductibles, co-insurance, prescriptions, and dental and vision care. Her is a more complete list of other expenses.
You can withdraw any amount from an HSA at any time,butif you use it for something other than a qualified expense it’s subject to regular taxes plus a 20-percent penalty
Once you reach age 65, you can use HSA funds foranythingwithout incurring the 20-percent penalty. You would only have to pay regular income tax on money used for non-qualified expenses.
If your employer offers a HAS you simply sign up and designate how much you want taken out of each paycheck. That amount will go into your account before taxes.
If you have a High Deductible Healthcare Plan and your employerdoesn’toffer one, or if it’s a private plan, you can set up an HSA at any of the major brokerages like Vanguard, Fidelity or Schwab.
Here are some questions we answered from our callers on today’s program:
I have a small amount of money that was given to me as a pension from a job from a long time ago. I was given the opportunity to take the money and invest it. It is in a holding account. I have been told to put it into a self-directed IRA. Should I do this now or wait until the market is steadier?
I recently sold a property and I do not need the funds right now. How should I handle this money?
My husband and I own our home, but we do not have any retirement saved. We are considering a reverse mortgage. What is your opinion on this?
I have 3 IRA accounts and each is tied to a life insurance policy. They all have my name on them, but they are all for different purposes. How do I go about getting the money to the correct places?
Ask your questions at (800) 525-7000 or email them [email protected]. Visit our website atmoneywise.orgwhere you can connect with a MoneyWise Coach, purchase books, and even download free, helpful resources.
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