What You Should Know About Has

As any population grows into senior status, the need for good medical care grows and obtaining it also grow. It is no wonder that many programs are set up with this in mind. A Health Savings Account, commonly referred to as a HSA, is a tax free savings account as long as the owner of the account follows the federal government set guidelines when they use the account.

Don't confuse HSA with an insurance plan, rather it is made up of two components. One part HDHP or High Deductible Health Plan and the second part being a saving account. However there is another feature attached called "above the line" deduction which simply means that all the money contributed to the plan is considered for this deduction.

What that is a deduction that someone can take before they calculate the adjusted gross income. That in itself is a positive and better than any itemized deduction. Another great feature in this plan is that it will grow tax-free as long as it is used for medical cost, or when the person reaches the age of 65.

Many people are familiar with flexible spending plans that is job related. The HSA is different in that the individual is not required to spend the money within the current year. This is how the account can be a great asset to anyone because the funds are allowed to year after year accumulate. If a person doesn't use much of the money for actual medical cost, at a 65 they get to cash in the rewards of this account for retirement. This is simply a great way to accumulate wealth as long as your health is good.

Here is a simple layout of how the account plan works. It starts when an individual puts funds into the account, which are tax free when deposited, which in turn accumulate each and every year thereafter. If any of the money is unused the individual owns at the end of the plan term, however the individual must be of retirement age to take advantage of this and is a great way to start of retirement. One additional benefit is that the doctor and the individual control how health care cost are handled, making this a great way to shelter money for later years.

Something else to be aware is a HSA can be inherited. The individual who owns the HSA can appoint a beneficiary in the event that the person passes on. People who are self-employed gain a double benefit using a HSA. There is the self-employed health premium paid tax deduction and the HSA contribution tax deduction. Both of these are considered, "above the line," deductions and can be used simultaneously. The benefit to having a HSA outweighs the concerns a person may have about the high deductible health insurance plan. It is something to consider when doing any long term retirement planning.

By: Ethan C Kalvin

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