If you want to make the most of your money, you need to look closely at your HSA. A health savings account (HSA) remains a solid way to build up savings to pay for health-related costs in the future. But are you using yours to best advantage? Here’s how to make your HSA work for you in 2016.
What is a Health Savings Account?
Health savings accounts (HSAs) are similar to personal savings accounts but for a specific purpose – as the name says, you use them to save money for health care expenses in the future. As a HSA is under your control, you – neither the insurer nor your employer – has the final say in how much money you save and what you use it for. The main benefit of the HSA is the tax-free nature of the account. Not everyone is eligible for a health savings account, but if you are you can use it to help manage your health care finances.
Health savings accounts are designed for people with high-deductible health care plans. They work best for people who are generally in good health and who want to save their own money for their own future health care needs. They are good for people nearing retirement age who can use the money in the HSA for post-retirement medical care. You can use a health savings account to pay for the deductible as well as for any co-pays that you need to deal with before your health insurance kicks in. Are you getting the most out of your HSA?
Getting the Most Out of Your Health Savings Account: 7 Things You Can Do
1. Make Sure You Fund It
It is tempting to put off putting in the dollars. Many people open a HSA and think they will fund it next week, or next month. But you can’t get a tax break if you put money into the account after you have fallen ill, or suffered an injury. Even if you cannot put much money into the account at the beginning, maximize your health savings account and start funding it or miss out.
2. Minimize Your Costs, Don’t Burn Through the Deductible
Many people think the way to deal with an HSA is to use the money as quickly as possible in order to meet the deductible. But this can be a mistake, and you end up using money that comes from your pocket that could otherwise have been saved. Look at how you can minimize the costs of health care rather than try to reach the deductible in double-quick time.
3. Move Your Money If Necessary
If your employer sets up an HSA along with your high-deductible health insurance plan you don’t have to keep the money in the same account. If you prefer, you can move it to an HSA of your own choosing. You have control over where your money goes. If you transfer it to a non-HSA account, however, there will be penalties.
4. Did You Consider Investing?
If you are healthy and your money in the HSA is just sitting there, you can use the account as an investment fund. Not all HSAs are simple savings accounts. With some you can invest in mutual funds and therefore raise the value of your savings. Remember that with the tax-free benefits it is a good way to invest when you have the choice of being able to build up a balance.
5. Name Your Beneficiary
What happens to your hard-earned and hard-saved cash if the unthinkable happens and you pass away without naming a beneficiary? The money gets tied up in the courts and, at worst, your loved ones don’t see any of it. Name your beneficiary as soon as you put money into the account.
6. Find Out About Wellness Programs
In order to enhance the wellbeing of their employees, many companies run wellness programs and incentives that pay money into HSAs in exchange for participating in a series of physicals, or signing up for a healthy living plan. See what your company offers and it could benefit your health and your HSA balance.
7. Pay Attention to Your Doctor’s Billing
Even when you are paying your own money for health care your doctor still needs to bill your insurer. If not, the money won’t go towards the deductible and this is a big mistake.
HSAs bring big benefits. By looking at how well you are using yours, you can make a big difference to your finances this year.