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If you recently enrolled in a high deductible health plan (HDHP) to lock in lower insurance premiums, you could be worried that you might just be one medical emergency away from paying high out-of-pocket expenses. While these plans fit your monthly budget, they also require you to cover a higher portion of your medical expenses before the insurance company starts to pay.
But if you open a health savings account (HSA) and make regular deposits, you could put your worries to rest since the account can help ensure you have money available to over out-of-pocket medical costs.
What is a Health Savings Account?
Health savings accounts (HSAs) are tax-advantaged accounts where you deposit money to cover future qualified medical expenses, such as copays and prescriptions. You won't be taxed on qualified withdrawals. But if you use funds to pay for expenses not allowed under the plan, you could face hefty penalties when you file your federal tax return.
For 2022, the annual HSA contribution limit for individuals is $3,650 and $7,300 for families. The Internal Revenue Service allows people age 55 and over to make an additional catch-up contribution. For 2022, the maximum catch-up contribution is $1,000. Whether an HSA is funded with after-tax dollars through a financial institution or pre-tax dollars through an employer-sponsored HSA, deposits grow tax free. Account holders who open an HSA at Vermont Federal may reduce their tax liability by the amount of their contribution when they file taxes.
4 Reasons to Open an HSA
The benefits of an HSA can last a lifetime. AS long as you remain enrolled in an HDHP, you can contribute on a schedule that fits your budget. If you need to pause contributions or increase them, you don't need prior approval. Besides the flexible nature of these accounts, HSAs are an option worth considering since:
You can withdraw funds at any time. For example, an HSA Visa® Debit Card or check linked to your Vermont Federal HSA account makes it easy for you to pay for qualified expenses. There's no need to submit receipts and wait to be reimbursed for medical costs.
You can use HSA funds for a variety of medical expenses. Many people are surprised to learn that HSAs can cover a variety of medical costs, like, buying and training of a guide dog and stop-smoking programs.
Your HSA belongs to you, not your employer. If you change jobs, stop working, or switch to a different medical insurance plan, you still have access to the HSA. The money deposited into the account is yours to keep as long as you want.
Your HSA funds do not expire. Unlike a Flexible Spending Account. which also allows you to save for medical expenses, an HSA can roll over each year without penalty.
Whether you require a high cost medical procedure later this year or decades from now, an HSA could provide a simple way to save a pay it along with other qualified medical expenses. Open a Vermont Federal HSA account today!