Well being financial savings accounts (HSAs) present a tax-advantaged option to save and pay for well being care prices. When you’ve got a high-deductible well being plan (HDHP), you may contribute pretax earnings into an HSA and use the cash to pay for certified medical bills.
The foundations and necessities for collaborating in an HSA generally is a little complicated. Consequently, misinformation has given rise to a number of myths that deter folks from profiting from HSAs. Let’s check out a few of the most typical ones. (See additionally: 10 Causes an HSA Is Truly Value Having)
1. HSA funds are misplaced in case you do not spend the cash by the tip of the 12 months
This can be a level of confusion that tends to scare folks away from collaborating in a well being financial savings account. It is not true. Funds leftover in your HSA will not be misplaced on the finish of the 12 months, they’re yours till you spend the funds. The prevalence of this fable comes from a unique well being program, the versatile spending account (FSA). You do lose funds in an FSA if you don’t use them by the tip of the 12 months.
2. You may solely earn low curiosity in your HSA funds
Truly, you do not have to depart your HSA funds in a low-interest financial savings account. You may make investments HSA funds in shares and different investments for greater progress potential. That is particularly useful in case you do not plan to spend your HSA funds any time quickly and might benefit from tax-free progress for so long as doable. Funding choices range by HSA supplier, and a few require a minimal stability (similar to $1,000) earlier than you may put your HSA funds in funding choices.
3. HSA funds can solely be used for hospital payments and main medical bills
Well being financial savings accounts will not be just for main medical prices. The IRS identifies a protracted listing of health-related bills that HSA funds can be utilized to cowl, together with smaller bills which will shock you. A number of examples embody:
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Acupuncture
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Bandages
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Chiropractic remedy
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Contact lenses
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Dental care
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Eyeglasses
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Listening to aids
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Prescribed drugs
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Bodily exams
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X-rays
(See additionally: 11 Shocking Issues Your HSA Will Cowl)
4. You may’t get an HSA in case you are self-employed
Many employers provide HSA applications as a profit. Some even kick free cash into HSA accounts for workers. Nevertheless, you need not have an employer to open a well being financial savings account. In the event you join a high-deductible well being plan (HDHP), you may fund an HSA by means of an HSA supplier and get all the similar tax advantages.
5. In the event you by no means have well being bills, you will by no means have the ability to use your HSA funds
Most individuals can anticipate to have vital medical bills sooner or later of their lives, particularly as they become old. However what would occur to your HSA funds in case you stayed wholesome and by no means had any well being care bills? Starting at age 65, you may withdraw your HSA funds for any purpose with out penalty, solely paying earnings tax on funds you draw. This function signifies that your HSA successfully turns into a conventional IRA whenever you hit 65, with the additional benefit that in case you do have certified well being bills, you may entry your HSA funds tax-free for these prices.
6. Excessive-deductible well being plans solely profit wholesome folks with low well being care prices
When you’ve got lots of medical prices, chances are you’ll determine that it would not make sense to enroll in a high-deductible well being plan when a low-deductible plan will step in earlier to pay to your care. This is not trying on the complete image. Some great benefits of utilizing an HSA can transform a sensible alternative for a lot of people and households. The upper potential out-of-pocket well being care prices with an HDHP will be offset by the decrease premiums and tax advantages of a well being financial savings account. You should utilize an HSA vs. conventional well being plan calculator that will help you determine which is finest primarily based in your anticipated well being bills.
7. HSAs are a trouble to make use of
This is without doubt one of the myths that stopped me from signing up for an HSA at first. I frightened that it might be too tough to get funds out of my HSA once I had medical bills. Nevertheless, I discovered that it’s truly straightforward to entry HSA funds. These are a few of the options that make an HSA really easy to make use of:
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You will get an HSA debit card to make use of when paying for well being care bills.
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You may write a examine to pay for medical bills, then switch cash out of your HSA into your checking account to cowl it.
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Well being financial savings accounts sometimes have on-line instruments you may entry out of your pc or telephone to examine your stability and see a report of your transactions.
8. In the event you lose your job or change employers, you lose your HSA funds
Not true! HSA funds are moveable from one employer to a different, and also you get to maintain your HSA funds even in case you cease working altogether. If you’d like, you may even change your HSA supplier with out altering employers.
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