Daniel Stewart

A Quick Guide to Health Savings Accounts

If you're wondering, "What is a health savings account?" you're not alone. A health savings account (HSA) is a different approach to health coverage that offers unique benefits to protect both your financial and physical well-being. If you prefer health coverage that has a higher deductible and lower premiums, a health savings account (HSA) might be a good option for you. Here's what you need to know about HSAs.

What is a health savings account?

A health savings account is a type of personal savings account that works in tandem with a HSA-qualified high deductible health insurance policy. A HSA serves as both an investment and health coverage because you use its funds to pay for healthcare expenses that aren't covered by your insurance policy. If you don't use it, it accrues tax-free interest and continues to grow. You can also use your HSA to pay for the healthcare expenses of your spouse or other family members, even if they aren't covered by your insurance plan. If you would like to know - what is a health savings account? visit this website.

How does a health savings account work?

A HSA allows you to make tax-free deposits, essentially lowering your federal income taxes. You can take out funds at any time to pay for medical expenses that aren't covered by your insurance policy. The funds in your HSA roll over from year to year, and once you are 65-years old, you can also use HSA funds for non-medical expenses without paying any penalties. However, you will owe income tax on those withdrawals.

There are limits on how much you can contribute to your HSA, depending on your individual or family health insurance coverage.

How to set up an HSA

To set up an HSA, you must first be enrolled in an HSA-qualified high deductible health insurance policy. You can enroll through the healthplace marketplace, directly through health insurers, or through your employer during the open enrollment period.

Once you're enrolled in a high-deductible health insurance policy, you can set up an HSA through the same bank you have your checking account with. Or, if you get your health insurance through your employer, you may also be able to ask your HR team for recommendations on where to set up an HSA. Most banks, credit unions, and brokerage firms offer accounts for savings and HSA funds.

Now, instead of asking, "What is a health savings account?" you can ask, is it right for me? This is a question that may be best answered by your financial advisor.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years' experience in business finance. You can find his thoughts at HSA strategy blog.