A Health Savings Account (HSA) makes for an easy way to save and pay for qualified medical expenses now and down the road, even into your retirement years.
The ABCs of HSAs
Simply put, it’s a special, tax-advantaged account that’s available if you have a high-deductible health insurance plan (HDHP). Unlike a Flexible Savings Account (FSA), the funds in an HSA carry over from year to year and will move with you if you change jobs, become unemployed or change your medical coverage.
Just like an IRA or 401(k), contributions you make to an HSA are not taxed as ordinary income. When you use your HSA funds to cover medical costs, such as insurance copays and prescriptions, long-term care services or other health-related expenses, the funds come out tax-free.
IRS Publication 969 includes a complete list of qualifying expenses and other details, including annual contribution limits.
Reasons to consider an HSA
Even if you currently don’t spend a lot on healthcare, you may still want to consider an HSA. That’s especially true if your employer’s benefits package includes matching or lump-sum contributions to help offset the higher deductibles. Remember, those funds carry over from year to year, so they’ll be there when you need them.
Also, qualified medical expense you incur from the moment you open your HSA are eligible for tax-free reimbursement, even if you haven’t funded the account yet. That means if you opened your HSA on Monday and were charged a $30 copay at your doctor visit on Tuesday, you can deposit $30 to your HSA and then reimburse yourself tax-free.
Of course, once you do have money available in your account you can simply use your HSA debit card to cover copays or pay your medical bills with the same tax benefits.
Part of a smart retirement strategy
An HSA is also a great way to save for expenses that may happen during your retirement, when you are likely to have higher medical costs and less income to pay for them. One of the great benefits of HSAs is that the funds carry forward from year to year and can always be used to pay for qualified health care expenses tax-free.
Getting started with an HSA
TCU offers HSA accounts for members with high-deductible health insurance plans - either through their employers or individually – and we make it easy for you to build your unused balance over time.
- Start with an HSA checking account, where your funds earn a competitive return and are available when you need them.
- Once your balance is at least $1,000 more than you need to cover your deductibles for the year, consider depositing those excess funds into an HSA certificate to earn an even better return on the money you don’t plan to use in the short term.
We’ve also made it easy to open your HSA account online. Visit our HSA page for more information or schedule an appointment with a TCU Team Member to get started today.