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Why an HSA Makes Sense

Health Savings Accounts are often spoken of with reverence, as though these $5,000-per year contributory accounts are the saviors of the U.S. healthcare system and can be an adequate substitute for many health insurance plans. While a $5,000 a year contribution will hardly help pay for transplants and heart surgery, these accounts should not be overlooked as a helpful tool. They do provide many benefits, if you simply know how to utilize them.

Here are 4 benefits of HSAs that might make a difference in your life.

  1. Tax deductible contributions: Insureds are permitted to contribute up to $5,000 per year in their HSA – and these contributions are federal tax deductible. If you are in the 10% tax bracket, that means you will save $500 on your taxes simply by contributing to an HSA. Some states also allow the deduction to be applied to state taxes.
  2. A medically dedicated financial account: If you have a hard time saving money, then an HSA can be a great tool to ensure that you have the funds you need to pay all your copay amounts and health insurance deductibles. Because this money can’t be used for anything else, it’s the perfect savings account for the undisciplined saver.
  3. Create an easy and defined savings plan: It is easy to decide how much to save each month when you have a limited contribution amount. Knowing that the most you can add to your HSA each year is $5,000, you can easily split this into monthly or weekly contribution amounts.
  4. HSAs roll over: There is nothing to worry about if you do not use your health savings account money every year, because the balance rolls over to the next year for use with eye doctor visits, prescriptions and other medical expenses.

September 14, 2010

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