- Nadine Hohnke
What is a Health Savings Account (HSA)?
Savvy Detroit residents are always looking for prudent ways to get ahead. One method that can be quite advantageous is to enroll in a Health Savings Account. What is a Health Savings Account? How does a Health Savings Account work? A Health Savings Account (HSA) is an account that allows you to save money on a pre-tax basis to pay for qualified medical expenses. Through the use of untaxed money in an HSA, you may be able to lower your overall health care costs.
A Health Savings Account can be used to pay deductibles, copayments, coinsurance, and some other related costs. However, HSA funds likely cannot be used to pay premiums. If you are looking for ways to save money and protect your future in Redford, a Health Savings Account may be for you. Looking to find out what is a Health Savings Account, and how does a Health Savings Account work? Read on with the experts from Public Service Credit Union below and explore our resources to learn more!
How Does a Health Savings Account Work? How to Qualify?
Those with an HSA can use the money for qualified expenses at any time. However, in order to qualify for an HSA, you must have a High Deductible Health Plan (HDHP). You can enroll in an HSA through your employer if it is offered, or you can open a Health Savings Account on your own as long as you qualify. You can search for plans that specify that they are “HSA Eligible” if you want the option to open a Health Savings Account.
So, how does a Health Savings Account work? Each year you will set the amount you want to contribute to the account. While this figure is up to you, it can’t exceed the government-mandated maximum which fluctuates from year to year. You will be issued a debit card or checks linked to your HSA that can be used to pay for qualified expenses, such as deductibles, copayments, and coinsurance.
Benefits of a Health Savings Account
Along with the benefit of using pre-tax dollars, there are a number of advantages that an HSA can bring. One perk is the ability to roll over funds from year to year. While a Flexible Spending Account will see funds disappear, those with Health Savings Accounts won’t lose their savings. Another bonus of investing in an HSA is the ability to use funds later on. While you cannot contribute to an HSA after the age of 65 while on Medicare, you can use your savings for eligible out-of-pocket medical expenses at that time.
Tax benefits are a major perk of having a Health Savings Account. Your contributions will either be pre-tax or tax-deductible. Additionally, HSA contributions lower your tax burden. If you make $45,000 but contribute $3,000 to your HSA, you will be taxed as if you made $42,000, effectively lowering your taxable income while retaining the value of your earnings.
Turn to Public Service Credit Union for Financial Guidance
Now that you know what is a Health Savings Account, you can confidently prepare for your financial future. Whether you want to fully understand the benefits of an HSA or want guidance on how to monitor your credit, Public Service Credit Union has you covered. Our team is dedicated to helping our Romulus clients save for the road ahead. Still wondering, “how does a health savings account work?” Contact us for individualized consulting.