Health savings accounts have become quite popular since it was first developed in 2004. This program is a way to help people meet deductibles and copays as they put aside money for unexpected and planned health care expenses.

While many employers offer HSA plans, individuals can open a plan even if they can’t get one from where they work. These programs are ideal to help you prepare for future medical costs. In addition, they have benefits that work as a retirement account.

An Investment that Grows

HSA’s are structured similar to retirement plans. They are treated as such by the IRS, and they allow you to invest your money before taxes. Another option is to deduct your contributions, which reduces the amount of taxable income you have.

Another bonus is that the money you set aside continues to grow tax-free as long as you don’t use it. You can open your own HSA even if your employer doesn’t offer one as long as you have a minimum deductible of $1,250 or $2,500 for family plans. You can contribute up to $3,250 for a person or $6,450 for families. For people 55 and older, they can utilize the catch-up provision that enables them to invest an extra $1000 per year.

Check if you can take advantage of the HSA tax loophole and save thousands

HSA Tax Benefits

There are several reasons HSAs are so popular. For one thing, you have the ability to roll over your funds each year. You don’t have to use them to keep from losing them. This is a big incentive for people who are healthy but worry about future medical problems.

Some HSA programs allow you to turn your money into mutual funds or various other investment tools to maximize your profits. Because your plan belongs to you rather than your employer, you can take it with you no matter where you work. You can open an account anywhere.

Another big bonus over traditional retirement plans is you can withdraw the funds at any time with no penalty or taxes as long as it is for a medical expense. However, you will have to pay a penalty and taxes if you withdraw the money for nonmedical expenses.

After you turn 65 years old, you can withdraw the money for any reason with no penalty. However, you will still pay taxes on it. Assuming you are in a lower tax bracket at that time from where you are now, you will still benefit.

Know Your Account

Not all plans are the same, and they haven’t received the scrutiny that retirement plans have received. What this means is that you’ll need to be more diligent to review the details of any plan you choose to make sure it fits you. Some will require a monthly fee. They may be FDIC-insured or they may not have this protection. Some have minimum balance requirements while others have special features.

An HSA is one way to save money for medical expenses, but it also offers other benefits, such as being part of your retirement plan.

Check if you can take advantage of the HSA tax loophole and save thousands