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Asked 1/12/2007

Health Savings Account, worth it?

Just started a new job, and I am thinking about getting health care that allows me to start a HSA (never had a HSA before). Basically is it worth it? My insurance premiums would be cheaper, and I dont expect health costs this year (I am 28 and in good health). Also my employer would contribute $400 if I started and HSA which too me almost is like free money. So are their complaints agaisnt a HSA and if you have one has it for the most part worked out?

 
 
 
 
 
 
Answers

Answer 1/7 - Submitted 1/12/2007

Do you have any co-pays or co-insurance or deductibles that you will have to pay? Do you have any medical/dental expenses that are not covered by your medical plan? Then the HSA will be worth it, since you will be using pre-tax dollars.

If you do not have any such expenses, then the HSA will not be worth it.

That's what it boils down to, plan and simple.

 
 

Answer 2/7 - Submitted 1/12/2007

If you don't have any dependents, and can save Tax free this is a good idea...

Otherwise it is better to invest that money in your portfolio. If you don't have a portfolio see a company like TD ameritrade. Your money will grow in the longterm by about 10%, verces 1% in a savings account. Therefore if you get sick at 42 years of age, you will have 4 times as much money to cover your illness. (rule of 72).

 
 

Answer 3/7 - Submitted 1/12/2007

The only real downside is going to be the gap between your high deductible and what your employer is putting in.

For an individual, that deductible may be something like $1000....so with your employer kicking in $400 per year....you'll need to come up with another $600 of your own cash to put in there to protect you in case you have to dip into that to reach your limit before the health insurance actually starts paying.

That is about the ONLY downside.

HSAs have tons and tons of important, helpful benefits.

For example...the plan is tax free going in....accumulates tax free....comes out tax free as long as you use the money for qualfied medical expenses.....and it rolls over from year to year and from employer to employer.

When you retire....the account turns into a retirement account that you can use for anything....it will still be tax free for health expenses, but you can take out the money for ANY purpose and only pay your post retirement tax rate....

The money rolls over from year to year. If your employer continues to put in $400 per year and you put in $600 per year to get to your deductible and you don't use it....within just a few years....you'll have a few thousand dollars...enough to pay 3-4 years worth of deductibles, if you get chronically sick, which chances are you won't.

It will also make you VERY much informed about the real cost of health care procedures and how to find the best care at the lowest price.....which helps bring down costs for everybody as providers realize people will stop buying poor, high cost care.

Most preventive care is already covered under the insurance portion of the account, so you don't have to worry about burning your cash for that.

If you are young and health an HSA is an excellent choice.

If you are older and sicker...it's not the best because you do have to pay the high deductible each year.

 
 

Answer 4/7 - Submitted 1/12/2007

I would ask your employer if the HSA is an actual savings account OR it the plan adminstrator provides a debit card for you to access your money. One is more convenient than the other.

If it's an actual account, you'll have to submit your receipt(s) for reimbursement. If it's a debit card, the funds are withdrawn from the account. Some administrators allow the card to be used at any merchant, some block the card and only allow the transaction to go thru if you use it a doctors office or pharmacy. Depending on the administrator determines if you have to submit your receipt(s) for verification or not.

If you go to drugstore.com, they have a tab titled "FSA." Items sold here are approved by the IRS for HSA & flexible spending accounts. This will give you an idea of what over the counter items qualify, such as Advil, allergy medication, band-aids, heating pads, etc.

The HSA also reimburses you for co-pays to your physician, dentist, and vision (office visit as well as glass/frames/contacts.)

The problem I find with an HSA is if you don't use the money in the account, you'll never get it back, and it doesn't rollover to the next year. So try to determine as best you can how much you may spend on these items. Worse case scenario, do what I just did....buy $75 worth of contact lens solution & walk immediately to the customer service to return it and get the money back on a gift card. Here you have your receipt showing a qualifying expense and your money you have left back to you on a gift card to use on something else.

 
 

Answer 5/7 - Submitted 1/12/2007

Sounds in your (healthy) case like a great deal-as long as you can rollover your $ at year's end. Mine does and you pay no income tax on the money deposited in your HSA. Also, you are
not taxed on any interest as long as the money is used for medical expenses and when 65 the money withdrawn is not taxed-Great deal for you now as it is also portable and goes from job to job.

 
 

Answer 6/7 - Submitted 1/12/2007

It is a great way to use your pre-tax dollars. The one draw back
is years down the road when you will want to withdraw the tens
of thousands of dollars amassed.. and will be penalized with
early withdrawal penalties. Study those and if they are
acceptable, go right ahead!

 
 

Answer 7/7 - Submitted 1/12/2007

If you have one of the newer HSAs that you can roll over to next year, it's worth it because it's pretax money that you can use for ANYTHING medically related - copays, over the counter medications, anything.

If it's one you must use or lose at the end of the year, then it still might be worth it for something unexpected, but put in the only the bare minimum so you don't lose a ton of cash. That would suck. This way you don't have to dip into your savings.

 
 
 
 

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