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.
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.
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:
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!
Vermont Federal Credit Union is a $900 million-plus full-service, not-for-profit, cooperative financial institution that has served Vermonters for more than 70 years, with eight locations currently serving over 50,000 members. Members are part of a cooperative, meaning they share ownership in the Credit Union and elect a volunteer board of directors. Vermont Federal Credit Union provides membership to anyone who lives, works, worships, or attends school in Vermont. Vermont Federal Credit Union is committed to supporting its communities and helping Vermonters prosper, no matter where they may be on life’s journey. Learn more about Vermont Federal Credit Union.