What is a Health Savings Account?
A health savings account is similar to a savings account, but the money in them are used to pay for health care expenses. You control the funds in your HSA, not an insurance company or your employer. Also, the money you deposit into the account is not taxed. To be eligible for an HSA, you must have a HSA-Compatible health plan.
Is a Health Savings Account Right for you?
Like every other health care option, an HSA is not a one-size-fits-all plan. You should weigh your options, think about your budget and what health care you’re likely to need during the next year.
If you’re generally healthy and ant to save for future health care expenses, an HSA might be a good choice. Or if you’re near retirement, an HAS may make sense because the money can be used to build up a nest egg for medical costs during your retirement.
On the other hand, if you think you might need expensive medical care in the next year and would find it hard to meet a high deductible, an HSA is probably not your best option.
- You decide how much money to set aside for health care costs.
- You control how your HAS money is spent and can shop around for care based on quality and cost.
- Your employer may contribute to your HAS, but you own the account and the money is yours even if you change jobs.
- Any unused money at the end of the year rolls over to the next year.
- You don’t pay taxes on money going into your HSA.
- Illness and injury are usually unpredictable, which can make it difficult to accurately budget for health care expenses.
- The costs of medical care can be difficult to obtain.
- If you take money out of your HAS for nonmedical expenses, you’ll have to pay taxes on it.