6 Considerations for a Health Savings Account

A health savings account is becoming a popular tool to save money for medical expenses. Many employers are providing them in conjunction with a high-deductible health plan so that their employees can afford their deductibles. While they are becoming more popular, many people still do not know much about them. Here are a few considerations to think about with a health savings account. 

1. Pre-Tax Contributions

A health savings account is kind of like a 401k for your health. Just like a 401k, you can deduct a portion of your paycheck tax-free and put it into a savings account. Deducting a small percentage of your paycheck without taking taxes out will not result in much difference in your take-home pay. Therefore, you can accumulate a pretty nice savings for health expenses this way. 

2. Allows You To Budget

When it comes to health care, most people do not budget anything for it. Since health care is such a hard thing to budget for, most people do not account for it until it happens. With a health savings account, you can put away enough money to provide the medical expenses you need. Budgeting a small portion of your income to this makes sense and it will help you avoid large medical bills that you cannot pay. 

3. Employer Match

Depending on your employer, they might make a contribution to your savings plan for you. This works much the same way as an employer-match program on your 401k. You contribute so much and your employer will match up to a certain percentage to put in your health savings plan. This is a great way to build up funds without investing that much of your own money. 

4. Early Distribution Penalties

A health savings account is designed to save for health expenses only. If you take any of the money out for other reasons before you are 65, you will be penalized for it. In fact, you will have to pay taxes on the money and get hit with a 10% early distribution fee. This means you should stay away from this as a form of saving money for anything except medical fees. 

5. Gives You More Control

When you have money set aside for your health care expenses, you are automatically given more control over the situation. Many people just go wherever they can go that is the cheapest because they have no money reserved for health care. When you put back enough money in your health savings account, you can choose where you want to go based on treatment and service instead of money only. Getting the treatment you deserve should never be about money and a health savings account can make that possible. 

6. Anyone Can Get One

Contrary to what many people might think, you don't have to be at an employer that offers HSA's to get one. You can get one from a bank or any other financial institution. You can still contribute tax free and get all the benefits of a health savings account regardless.

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