HSAs (Health Savings Accounts) – What Are They and What Are Their Benefits?
What is an HSA?
HSAs are tax-deferred accounts that are meant to be used specifically for health-related expenses from co-pays to surgeries and more. It’s available to taxpayers in the United States who are enrolled in a high-deductible health plan. Unfortunately, there are some restrictions on who would be eligible for HSAs. Those not eligible to have one include those with traditional [non-HSA] health plans, Medicare, Tri-Care, VA benefits, a flexible spending account, or are claimed as a dependent on another person’s tax return. For those eligible for HSAs, you can pay for medical expenses with the investment funds for you, your spouse, and dependents tax-free.
What are some benefits of an HSA?
The contributions are deductible from your taxable income like traditional 401ks or IRAs and are also free from taxes when withdrawn for eligible expenses. Also unlike their cousin, the FSA, all the money invested rolls over year after year.
What are the contribution limits of HSAs?
For 2021, the contribution limits set by the IRS are $3600 for singles and $7200 for married people and at 55 you can invest an additional $1000. After the age of 65, it acts like a 401k or IRA in that you can make withdrawals for any expense that is taxed at regular income rates but with no penalty fees.
What are some HSA Brokerages?
Some good sites to go to in order to open your own HSA accounts and learn more about them are hsabank.com and healthequity.com, which are also endorsed by the famous financial counselor Dave Ramsey.
Another good one that I personally use myself is Lively HSA. It is entirely free and allows for a few investment options. If you just put the money in without investing it sits in a checking account that earns a small amount of interest. But you can also invest without any fees or minimum requirements using two options. One option would be a TD Ameritrade investment account if you want to invest by yourself or you could also use the Denevir HSA Guided Portfolio option if you prefer to just set it and forget it.
Disclaimer: I am not any sort of investment or financial professional giving any sort of legal advice. I’m just some guy trying to teach other people about how they might navigate the financial world.