Health savings accounts can do more than help with health care costs

Health savings accounts haven’t gotten anywhere near the amount of press—nor the attention from workers—that their advocates believe they deserve.

That could be because workers really don’t understand HSAs.

Nor are they aware of the multiple tax benefits that such accounts can provide—and that’s on top of their primary purpose: offering a means of saving to cope with steadily increasing health care costs.

Coupled with high-deductible health plans, HSAs offer employees the opportunity to set money aside to pay those high deductibles, as well as to save even more to pay other out-of-pocket medical expenses not covered by the health plan.

Health savings accounts and flexible spending accounts aren’t easy to understand. Here’s what you need to know.

But workers often don’t save much more than the minimum; in fact, a recent study found that not even one percent of respondents maxed out allowable HSA contributions.

That means they failed to capitalize on the many other advantages that HSAs offer.

That could be because they confuse the rules governing HSAs with those governing flexible spending accounts—which have use-it-or-lose-it rules that don’t apply to HSAs—and are afraid of losing any additional funds they might save over the minimum.

But there’s plenty more benefit to be had from an HSA, over and above its help with health care expenses.

Here’s a look at seven benefits to be had from using HSAs to the max. Workers, listen up.

  1. Contributions to HSAs are deductible from gross income.
  2. HSA money rolls over from year to year.
  3. Interest on HSA money is tax free.
  4. Money invested inside an HSA also grows tax free.
  5. At age 65, withdrawal penalties go away even if you take the money out for a nonqualified medical expense.
  6. You can use the money in an HSA to pay for long-term care.
  7. You can use the money in an HSA to supplement a 401(k).

For more information, read the full article here.