Health Savings Accounts (HSA) are frequently misunderstood by both financial advisors and the general public, which results in people using their HSAs as just simple short term cash accounts. While it’s true that even this way of using HSAs can provide a substantial tax deduction, there are additional benefits to taking a more comprehensive view of HSAs. You can contribute up to $3,500 to your individual HSA (and $7,000 if you’re married), and you’re allowed to invest that money long-term. HSA investments can compound substantially over time. Your employer can also contribute additional cash to your HSA. Your HSA finds roll over from year to year, so there is no need to spend everything in your HSA each year.
- Most financial advisors don’t routinely offer HSAs to their clients, and many feel that their clients (and sometimes they themselves) don’t understand HSAs.
- You can open an HSA if you have a high deductible health plan, aren’t enrolled in Medicare or any other health benefit, and meet some other requirements.
- The money you put into an HSA can be invested, and can grow substantially over time due to compound interest.
“However, many Americans are missing out on this valuable tax planning, savings and investment option.”