Budgeting for your healthcare is one of the best and most important things you can do when it comes to your finances and quality of life. Not many people want to face the music and realize that they may face health problems down the road that could cost them quite a bit of money.
While you may have a good health insurance policy, a health savings account (HSA) can help you even further with saving money and paying for your healthcare and treatment.
So, what are the benefits of a health savings account, and why should you open one today?
Cover Out-of-Pocket Costs
Unfortunately, health insurance doesn’t cover 100% of your healthcare costs. There are still deductibles and copays that you must pay before your insurance kicks in.
An HSA allows you to put money aside for these kinds of expenses. So, if you visit a clinic like ThriveMD and your insurance will only cover a portion of the care, you can pay the rest with your health savings account funds.
These funds can be used for any healthcare or medical treatment, including medications, doctor visits, and glasses.
Contributions are Tax-Free
When you deposit money into your health savings account, it is free from income tax. Therefore, you can put more of your paycheck into your savings account without having a percentage go to Uncle Sam.
When your funds earn interest, they also grow tax-free. So, your money is working harder for you, sitting in your account waiting to cover your medical expenses.
Funds Roll Over Each Year
If you still have money in your HSA at the end of the year, these funds roll over into the next year for you to use. Therefore, these accounts are a great way to plan for retirement and budget for your medical expenses.
A similar account, Flexible Savings Account, which is another savings account for medical expenses, is a “use it or lose it” structure that, if you have money at the end of the year, it disappears.
Reimburse Cash-Paid Medical Expenses
You can plan to pay for your copays or out-of-pocket medical costs with cash instead of your HSA. However, if you keep the receipt, you can reimburse yourself and withdraw funds from your health savings account tax-free.
This is a great strategy if you have large expenses, such as a wedding, tuition, or down payment coming up, and you would like to use tax-free money to pay for it.