Most of us are working hard every day for our money. But sometimes we forget to make our money work hard for us.
Our financial resource Carl Carlson, CEO & Founder of Carlson Financial, gave us ideas on how to do just that with five great reasons to fund an HSA.
An HSA is a Health Savings Account, and it can be contributed to by anyone who has a high deductible health insurance plan with a deductible higher than $1,400.
Up to $3,600 can be contributed per year, and Carlson said these numbers double for married people filing jointly, or a $2,800 deductible can fund up to $7,200. If you are over 55, you can fund an additional $1,000.
Also, don’t confuse this with an FSA, or Flex Savings Account, where any money you put into your FSA must be spent every year. Use it or lose it, he added.
Here are five great reasons to fund an HSA:
- Pre-tax contribution
- Tax free growth
- Tax free withdrawal for medical expenses including glasses, contacts, and dental work.
- No FICA taxes on HSA contributions, that’s a 7.65% savings.
- You can invest the HSA funds and after age 65, money can also be viewed like an IRA. You can take the money out for retirement without any penalties. But if you take the money out for non-medical expenses, you do have to pay taxes on your withdrawals just as you would with an IRA.
Carlson said the HSA could be a great tool for making your money work for you and noted it is the only account available that allows for pre-tax contribution and fax-free withdrawal. It also does not have to pay FICA.