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Benefits (and capture) of health savings accounts

It benefits the registration season open to many employers, and workers are increasingly likely to hear about an option, known as SSA, that can help them pay for their medical bills and save on their taxes.

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H.S.A.s, or health savings accounts, are not yet as familiar as their more well-known cousin, the F.S.A., flexible spending account. But H.S.A.s are becoming more common, according to the latest data.

To become, a H.S.A. service company, reports that the number of H.S.A. the accounts grew by 16% year-on-year to 30 June to more than 21 million. Assets held in the accounts increased by 23% to just under $ 43 billion. (The Devenir data comes from a survey of 100 mental health providers.)

H.S.A.s offers a triple tax advantage. Contributions can be deducted before tax from your salary, which reduces your taxable income; any interest or investment gain on the money is tax free; and withdrawals from the account are tax-free, as long as you spend money on eligible items.

And if you change jobs, the H.S.A. move with you.

But there is a catch: savings accounts are only available with certain health insurance plans that meet specific criteria, such as high deductibles – at least $ 1,300 for an individual and $ 2,600 for a family. (A deductible is the amount you pay for care before your health plan pays.)

The Employee Benefit Research Institute, which has a database of 5.5 million health savings accounts totaling $ 11.3 billion at the end of 2016, found that health insurance plans eligible for the SSA covered nearly three out of 10 employees last year.

High deductible health insurance plans generally have lower monthly premiums – but you will pay more for care. H.S.A. is intended to help cover these costs.

You can set aside up to $ 3,400 for one person, or $ 6,750 for a family, in a H.S.A. You can leave the money in an interest-bearing basic savings account or, in some cases, invest the money – just as you would with a 401 (k) retirement account – in the long run.

Ryan McCostlin, an expert in individual and family health care consulting firm Bernard Health, said tax-free growth available with H.S.A. made them powerful savings tools. “Consumers should put that money on the market and let it grow slowly over time,” McCostlin said in an email.

Fidelity, which offers H.S.A.s, said the money invested in a health savings account could help provide money to cover the medical and medical expenses needed to retire. He estimates that a 65-year-old who is retiring this year will need $ 275,000 to cover his medical and health costs during his retirement. (The cost estimate assumes coverage for Medicare coverage, but does not include additional costs such as a nursing home or long-term care home.)

However, many HSPs require that you have a minimum amount saved – say, $ 1,000 – before you can invest. The idea is that you should have money put aside before taking investment risks.

“If you will need funds in the near future to pay medical bills, it may not make sense to invest,” said Roy Ramthun, a H.S.A. consultant.

But some account providers allow you to invest at any time. The health financing start-up Lively, for example, allows H.S.A. participants to invest without minimum balance. Lively offers a base H.S.A. free of charge, or charge users a fixed amount of $ 2.50 per month to invest in low-cost mutual funds and exchange-traded funds through TD Ameritrade Online Brokerage.

(Basketball fans may be interested to know that one of Lively’s lenders is Kevin Durant, who said he was “attracted to the technology that helps people in real life.”)

Here are some questions and answers about health savings accounts:

Do I have to spend money in my H.S.A. at a certain date?

There is no deadline for spending money in an H.S.A .; balance simply rolls from year to year. (The Employee Benefit Research Institute reported that more than 90% of HAS ended 2016 with funds to carry forward for future expenditures).

What can I buy using my H.S.A.

H.S.A. the funds can be used for a variety of health care and expenses, including co-payments, prescriptions, dental work and braces. HSA Bank, an account provider, offers a list of expenses that meet the criteria of the Internal Revenue Service. HSAStore, an online store, stores eligible products.

Can I have a H.S.A. if I am independent?

Yes. If you have an SSS-compatible health plan, you can create a health savings account on your own. (Most plans eligible for health insurance are clearly labeled as such, if you are not sure, ask your insurer.) The money you pay is deductible, even if you do not detail the deductions in your plan. tax return. You can open an account through a bank or a company that specializes in them. Becoming offers a search tool. Morningstar recently ranked the accounts based on their fees and other criteria.

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