Now might be a good time to get a HSA
Thanks to some rules that have shifted due to the pandemic, now might be a good time to sign up for a what’s often called a 401(k) for your health — the Health Savings Account (HSA). You’re eligible to open one if you have a qualifying high deductible health plan. Here are some reasons to check out this savings option.
They Can Grow
The money you deposit in a HSA can be invested to grow tax-free and any withdrawals that you make for qualified medical expenses are also tax free. Even if you just flow the money through the HSA without investing it, that can mean a savings on all medical expenses equal to your tax break — typically about one-quarter to one-third. If you don’t make withdrawals, the money rolls over at the end of the year. As The New York Times reports, you can also invest your HSA funds so that they enjoy the fruits of the market.
They’re More Flexible
HSAs are more flexible now. Thanks to a pandemic relief package, money in a HSA can not only be used on medical expenses, but many other things — from pain relievers to non-prescription allergy pills. Feminine hygiene products are also, finally, eligible to be paid for from HSAs.
Your HSA stays with you no matter what. If you change jobs, insurance plans or even retire, your HSA remains by your side. In other words, the money is yours. Unlike the similarly named FSA, these accounts are not use-it-or-lose-it.
Many HSAs will issue you a debit card, which makes it quite easy to pay for approved items. You can use the card to make payments in person or over the phone to a doctor’s billing office. You can also use it to buy qualified items on Amazon, in stores like Target or on marketplaces specifically for HSAs like HSAStore.com.
They’re a Group Effort
You’re not the only one who can stuff your HSA. Contributions to your HSA can come from you, your family, your boss/employer, a friend and more. The contribution limits for 2020 are $3,550 for individuals and $7,100 for families.