Is an HSA right for you?

Many companies provide their employees with multiple health insurance plan options. Often times one of those options is a high-deductible plan with a health savings account or HSA. If this is an option, it is worth considering whether it’s the right plan for you and your family.

Pros

1. Structures health care savings – One of the biggest benefits is that it makes you start thinking about putting money away for healthcare. Without it, you may leave out-of-pocket health care expenses from your budget.
2. Tax benefits – Contributions to an HSA are federally tax-deductible and when it is withdrawn for qualified health care expenses, it is not federally taxable.
3. Retirement Planning – Many HSA’s allow you to invest in stock and bond funds so you can gain interest. If the funds are not used for healthcare in the future, they can be used similar to an IRA, with distributions being taxable.
4. Not like an FSA – You may have had a bad experience with a flexible spending account (FSA), where the funds do not roll over from year to year if they are not used. That is not the case with an HSA.

*There are a few states that provide no tax benefit for funding the account and treat income as taxable so be sure to check before opening an account.

Cons

1. Higher medical costs – If you have an HSA through a high-deductible plan and you need medical treatment, it can be more costly than a traditional plan, even after considering the tax benefits.
2. Complexity – You may have to go through the process of opening the account and managing the investments.
3. Expenses – Almost all HSA’s have expenses associated with them. Some charge a flat fee per month from $3-$5, some have investment expenses, some have minimum balances, and some have all three and more. Make sure you do your research before opening!

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide healthcare, legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized healthcare, tax or legal advice. We suggest that you discuss your specific situation with a qualified health insurance agent, investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.