Start the New Year Right: Keep in Mind Savings Opportunities in your HSA

By: Mary Anne Cody

Do your New Year’s resolutions include increasing your savings?

Congratulations, this decision will benefit you and your family greatly. If your employer offers a retirement plan such as a 401(k); this is an opportunity to save for the future using tax deductible dollars and have the protection of a qualified retirement plan. In addition your employer may offer matching contributions; this benefit should be utilized if at all possible.

Have you passed on this goal to children and young co-workers?

The benefits of compounding interest cannot be overstated. This graph from the US Department of Labor provides an illustration of the advantages of starting early to save for retirement. While it may not always be possible to have the growth this chart projects; nonetheless retirement savings are an important part of net worth.

The US DOL also has a straightforward publication on retirement savings, which would be worthwhile to share with those just entering the work force: Top Ten Ways to Prepare for Retirement.

Is there a bright side to having a high deductible plan? Or how can your HSA help you save?

A high deductible health insurance plan is the new reality for many people. A silver lining in this new reality is the potential saving opportunity in the health savings account (HSA).

An HSA is a tax-exempt account you open (if you qualify as a participant in a high deductible health insurance plan) with a qualified trustee. This is not a retirement plan; it is a savings account funded with tax-deductible dollars to be used only for medical expenses. HSA owners can contribute $3,350 (single) or $6,750 (family) annually and if over 55 years old, an additional $1,000 per year can be contributed annually.

HSA funds roll over from year to year, there is no “use it or lose it” as with flexible spending accounts (FSAs). Some HSA providers allow the contributions to be invested in mutual funds or similar products. The HSA is yours; it is not tied to your employer. HSA funds can be withdrawn, without tax implications, to pay for medical expenses.

When determining where to place your savings dollars, if you have reached the maximum for employer matched contributions or deductible IRA contributions, keep in the mind the advantages provided by an HSA. Funding an HSA is a good option to consider as a savings vehicle, especially if you estimate the monies will be used for medical expenses, taking into account the investment options available and the annual fees charged by the trustee.

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