Skip to content
Creating Healthy Communities

Creating Healthy Communities

  • Home
Posted on June 10, 2019June 10, 2019 by creating-healthy-communities

Is a Health Savings Account (HSA) a good idea? What are the advantages and disadvantages?

SavingYour Dollars

SavingYour Dollars

Health Savings Accounts (HSAs) can be established if you have a high deductible policy. The policies may be offered by employers or purchased privately. Individuals open the account at a local financial institution that offers an HSA option. Funds deposited into the account may be made privately or with contributions from employers. The funds cover the out-of-pocket expenses you are expected to pay with your insurance plan and can include vision and dental expenses that are not covered by a separate policy.

Money transferred to the account is non-taxable, and interest earned in the account is also exempt from taxes if used for qualified medical expenses. Because you own the HSA, you will retain the funds if you change employers and have different coverage available.

The funds can be used to pay health insurance premiums when you are between employers (COBRA), to pay long-term care insurance premiums, to pay Medicare deductibles and co-pays, or without penalty to cover living expenses if you are 65 years of age or older. HSA deposits are not “use or lose”; they roll over year to year and accumulate indefinitely.

That final point is probably one of the advantages people see with HSAs. The HSA can become, in essence, a tax-sheltered retirement savings vehicle when it is not needed for healthcare expenses.

The disadvantages of the HSA include:

  • limitations on the contribution amount deposited annually;
  • a limit on the total amount that can be held in the accounts;
  • traditional fees that you must pay the financial institution for management of the account; and
  • record keeping for tax purposes.

As owner of an HSA account, you can make withdrawals at any time for any purpose; however, if the funds are used for expenses that are not qualified medical costs or you are not at age 65+, you will pay standard income taxes on the withdrawal and an additional 20% penalty.

HSAs cannot be opened if you have traditional deductible coverage or after enrollment in Medicare.

For more information about HSAs, see these FAQs:

  • What are Health Savings Accounts?
  • How do health savings accounts work? Are they a good idea?
  • Where can health savings accounts (HSAs) be opened?
  • How do health savings account (HSA) contributions affect your income taxes?

We’re collecting feedback on FAQs. Please complete this quick survey to help with our continual improvements.

Tagsbudgeting, creating healthy communities, health insurance, health insurance literacy, health savings account, hsa, insurance, personal finance, saving

Post navigation

Previous PostPrevious Urban Forests: The Benefits Outweigh the Costs
Next PostNext Can grandchildren being taken care of by grandparents be on our insurance until age 26 and what if we go on Medicare?

Search

Connect with Us

  • Twitter
  • Facebook

Categories

  • Creating Healthy Communities

Tags

  • affordable care act
  • air quality
  • bio
  • budgeting
  • buffers
  • clue report
  • community planning and zoning
  • creating healthy communities
  • cultural identity
  • energy conservation
  • energy efficient existing homes
  • energy efficient existing homes: indoor air quality
  • energy efficient healthy homes
  • energy efficient healthy homes: molds and moisture
  • energy efficient new homes
  • energy efficient new homes: health and safety
  • energy efficient new homes: operation and maintenance
  • exchange
  • family caregiving
  • front page
  • habitat
  • health
  • health insurance
  • health insurance literacy
  • home health
  • insurance
  • insurance scams
  • marketplace
  • militaryfamilies
  • navigators
  • noise
  • obamacare
  • personal finance
  • property value
  • recreation
  • runoff
  • save energy
  • scams
  • sense of place
  • soil erosion prevention
  • telephone scams
  • trees for energy conservation
  • urban forestry
  • urban tree benefits
  • water quality

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

About eXtension

  • eXtension Members
  • Privacy
  • Contact Us
  • Terms of Use

eXtension

Powered by eXtension

© 2020 eXtension. All rights reserved.

This is a national Cooperative Extension resource

This work is supported by New Technologies for Agriculture Extension grant no. 2015-41595-24254 from the USDA National Institute of Food and Agriculture. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture.

Proudly powered by WordPress