Are you wondering whether or not a health savings account is right for you? If yes, this is the right place for you, as you can get all the answers related to this query. Let me tell you that health savings accounts are used to keep and save money for the future medical expenditure. These types of plans work differently from other types of bank accounts. Read on to find out how they work.
How a health savings account works?
Health savings accounts or HSAs are similar to personal savings accounts. However, the money that you put in them can only be used to pay for the expenses of health care. You are the only one who owns and controls your HSA account money and not your insurance company or your employer. Moreover, the money that you put into your HSA is not taxed. Additionally, you should have a high-deductible plan, which is a special health insurance type, in order to qualify for opening an HSA.
What is the purpose of health savings account?
Now you may wonder why HSAs were created. Let me tell you that high-deductible health plans and health savings accounts were created in order to control the costs of health care. The main idea behind these types of savings accounts is that consumers will spend their medical money more judiciously, if they use their own funds.
Is a health savings account right for you?
Health savings accounts have many benefits and drawbacks just like other health care options. If you are wondering if an HSA is right for you or not, you need to think about your different health care options, consider your budget, as well as the health care plan that you will require in the following year.
If you want to save the expenses for your future health care and generally stay healthy, then an HSA is a good option for you. Moreover, if you are going to retire pretty soon, then an HSA is an attractive option for you, as then you can use this money to compensate the medical care costs after your retirement.
Alternatively, if you cannot meet the requirements of a high deductible health plan and you think that you might require expensive health care in the following year, then an HSA might not be the best option for you.
Benefits of a health savings account
Some of the potential benefits of health savings accounts are:
- You do not have to pay taxes on the money that is in your HSA account.
- Any money that is not used in your HSA account for a year is rolled over to the following year.
- Although, your current employer may give money to you for your HSA, you are the one who owns this account and its money, even though you change your job.
- You have the control on how you spend the money in your HSA. You can look for the right health care, depending on its cost and quality.
- You decide the amount of money you put into your HSA.
Drawbacks of a health savings account
Some of the potential drawbacks of health savings accounts are:
- You need to pay taxes on the money that you extract from your HSA for non medical expenditure.
- The pressure that you need to save money in your HSA might result in you not taking medical care at the right time.
- A few people find it hard to save money in their HSA. Sicker and older people are unable to save the same money as healthier and younger people can.
- It can be hard to find the health care’s quality and cost details.
- The disease can be uncertain, which makes it difficult to exactly budget the medical care expenses.
Thus, now you can determine if a health savings account is right for you or not by comparing its benefits and drawbacks with other health care options.