Why should you have a health savings account? The most common question an American worker would have about health savings accounts is, what is a health savings account? The next question would be, “Why do I need an HSA?” A health savings account is essentially an supplemental IRA used to cover health expenses, in most cases the deductible on your health plan. They serve the purpose of self-insuring yourself against simple and relatively low cost health care expenses. Health saving accounts are one of the governments more logical solutions to get Americans to take a larger responsibility for their health care expenses.
An HSA is a simple concept. You put thousands of dollars away tax-free into an account. A withdrawal can be made from the account for qualified health expenses and the balance is owned by you, so it will grow over time and not reset in value each year like a flexible spending account does. As of 2011, you are allowed to put $5950 as an individual per year into this account tax-deferred. For family health insurance coverage the annual contribution limit is $11,900. The balance of your health savings account doesn’t have to earn a mere savings account interest rate, much like an IRA this balance can be invested into mutual funds. The gains from these mutual funds, so long as they are kept in your HSA account are also tax-deferred.
Obviously it’s easy to see the long-term benefits of an HSA, but there are also present day benefits to utilizing this account. For one, its just a sensible idea to minimize your tax liability. Secondly, you can greatly reduce the cost of your health insurance by getting an HSA-compatible health plan. Many people already have HSA-compatible health plans and don’t realize it. With the money you save on your health premiums, you can likely fund a good portion of your HSA annual contribution and have the luxury of self insuring yourself for simple medical and dental treatments.
What is the simple reason you should have an HSA? It saves you money in the short-term, even more money in the long-term and gives you greater control of how your health care dollars are spent the entire time. HSA’s make it possible to save even more money for your retirement tax-free on top of whatever is being contributed to retirement accounts. To put it simply, if you are healthy and have the money to put aside, there is no reason not to have a health savings account.
Source by Eric X Smith