Health insurance is so complicated. We deep dive into HSA plans so you can get the most out of your health care dollars.
What is an HSA? Simply put, it’s a health savings account that usually has an investment option and is tied to a high deductible plan. The money goes in tax free, it grows, and when you withdraw it to spend on out of pocket health care, it remains tax free! And it’s flexible.
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If you take it out to spend on non-health care purchases, it is taxed and there is a penalty but you do have that option. And once you reach age 65, you can use it without penalty and at the prevailing tax rate which should be lower than it was during your prime earning years. Not to be confused with an FSA (flexible spending account) which must be emptied by the end of the year or you lose the money.
The numbers change year to year but currently, a single person can put $3300 into an HSA and a family can contribute $6550. Our guests advise first funding the matching portion of your 401K, then fully funding the HSA, and finally going back to the 401K. Your HSA is portable too, you can take it with you when you leave your job.
If you’re self employed you can set up an HSA for yourself. Just buy a plan that is HSA qualified and you can reap the rewards available to the rest of us wage slaves. About 20% of the offerings on the HCE are HSA qualified so you’ll have several to choose from.
Once you put money into the HSA, you can spend it on medical expenses for yourself, a spouse, or any tax dependents, for the rest of your life tax free. You’ll generally receive a debit type card to spend the money with.
Should you leave your job, get fired or laid off, you can use your HSA to pay for Cobra premiums and once you reach 65 you can use it to pay Medicare premiums.
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There are some unexpected benefits to this system aside from just the financial. When your insurance covered everything but your $10 co-pay, you didn’t ask to many questions. Now that it’s your money, you suddenly want to know the justification behind your doctor ordering you and MRI.
You want the generic prescription at a fraction of the price rather than the name brand. You might even start looking after your health a bit more carefully. Insulin is expensive, maybe I should cut down on the carbs. This has forced transparency is what has traditionally been a very murky world and sunlight benefits us all.
Speak to your HR department and see if a high deductible plan with an attached HSA is available to you. Take control of your health and your money.
Allagash Tripel: an ale with a long, smooth finish.
Ask MR HSA: Todd’s site to answer all your HSA questions.
Consumer Driven: John helps break down the barriers for health care consumers.
HSA Administrators: Awesome HSA side recommended by a listener that allows you to put your HSA contributions into Vanguard funds.