Is an HSA right for you?

There are many variables that can affect the way you choose your health coverage, including your understanding of the options presented to you. Health savings accounts (HSA) are gaining popularity in health care as a cost-effective option for many people. However, each individual and family has their own needs and wants, so an HSA may not be right for everyone. A quick look at the pros and cons of these health plan options can help determine what works best for you.

HSA Advantages

  • Saves Money – For individuals who are generally healthy and have a good estimate of their annual health care expenses, money can be saved when paired with a high deductible health plan, which results in lower premiums. Ultimately, less money is coming out of your paycheck.
  • Transferrable – Even if you are terminated from your job or leave the position, you can keep your HSA through a change in jobs.
  • Tax Savings – When you contribute to your HSA account, you can experience triple tax benefits. You put money in tax free, you can withdraw it tax free for qualified medical expenses, and unspent dollars roll over each year making retirement savings possible.
  • Money doesn’t go to waste – Unspent funds don’t go to down the drain. Money is rolled over into the next year, helping with flexibility in your accounts as well.

HSA Disadvantages

  • Unpredictability – Even for healthy individuals, illness can come unexpectedly. This can make budgeting for the year difficult, and result in high out-of-pocket costs if a large medical expense comes your way.
  • Hesitant to Spend – Because HSAs can provide valuable tax advantages, many people may become hesitant to spend when there is a potential savings opportunity. This can result in people justifying skipping doctor’s visits or in getting the care they need as they want to avoid pulling from the account.
  • Penalties – If money is taken out of the account for something other than a qualified medical expense before the age of 65, you will owe taxes along with a 20% penalty. After the age of 65, you will owe taxes, but no penalty will be charged.

Ultimately, the final decision will vary for each individual and family. If you are healthy and have a general idea of your annual health expenses, the tax savings and other advantages could provide you with valuable benefits. On the other hand, older individuals who are more prone to illnesses or unexpected conditions could find a traditional plan more beneficial than going out on a limb attempting to budget for the year. At Faison Group, we would love to help you determine if an HSA is right for you or your employees, and we are glad to help you gain a better understanding of how they work. Feel free to Contact Us with any questions!