Healthcare costs can add up quickly. In fact, the average American household spent nearly $5,000 per person on healthcare last year. Plus, couples that plan to retire this year are slated to spend more than $380,000 on healthcare during their retirement. Where does that money come from? It’s important to answer that question early in order to best prepare for future expenses. At Elements, we’re here to support your savings goals and help you adequately plan for the future.
What is a Health Savings Account?
A Health Savings Account, or HSA, is a government-approved deposit account dedicated to saving for current and future medical expenses, while also reducing your taxable income. To qualify, you must be enrolled in a qualified high-deductible health insurance plan and cannot be currently enrolled in Medicare. Additionally, you cannot be claimed as a dependent on another person's tax return.
Contributing to Your HSA
There are limits to how much you can contribute to your Health Savings Account, set by the government. As of April 22, 2020, these were:
- Family: $7,100 total
- Individual: $3,550 total
- Seniors (55+): Extra $1,000
Remember that money in your HSA carries over from year-to-year.
Using Your HSA
With Elements, you can use your HSA debit card at retailers coded as a medical merchant by VISA. This includes point of sale at retailers like pharmacies, online sites for qualified health-related items, and bill payments to medical providers.
Many HSA accountholders use their funds for doctor and hospital visits, vision exams and treatments, dental work, lab tests, prescriptions and chiropractic care. While those are common uses, HSAs can be used for things like sunscreen, ultrasounds, medical alert bracelets, alcoholism and drug treatments, and nursing homes – among many other qualified expenses.
When looking for medical services, the Health Care Blue Book is a free consumer guide to help you determine fair prices in your area for health care services. Another resource is HSAStore.com – which is the only site exclusively focused on health savings accounts and an easy way to shop for eligible products.
Taxes and Your HSA
HSA contributions are made pre-tax. The consumer does not pay taxes on the growth of the account. When money is taken out, withdrawals are tax-free if being used for eligible expenses. Since your HSA contributions do not count toward taxes, you are taxed as if you make less income.
After age 65, your HSA withdrawals are taxed just like an Individual Retirement Account (IRA) with no penalties for non-qualified expenses. Plus, you can use HSA money tax-free for your Medicare premiums.
Elements gives you the opportunity to invest your HSA with TD Ameritrade. You have the option to purchase stocks, bonds and thousands of mutual funds. This service comes with online access to real-time data, customizable charts, and one-click integrated trading.
You do not have to pay taxes on the investment earnings from your HSA dollars. The sooner you start investing, the more your money will grow and compound. This is a great place to invest for medical expenses incurred during your retirement.
Elements additionally provides members with an HSA portal online. You can use this to keep track of your HSA receipts in one spot, find tools such as the HSA Blue Book – all with easy access from our Online Banking and Mobile App.
Saving for the future is important. Consider your strategy for unexpected medical bills or future long-term care needs. Elements is here to support you with a Health Savings Account or any financial advice you might need to improve your life!
Elements does not provide tax advice or serve as your tax advisor. Sources: CNBC | Montley Fool
This information is provided for informational purposes only. It does not constitute legal, tax or financial advice. Consult with your tax, legal or financial adviser before taking any action.