by Kelly Whalen
Health Savings Accounts (HSAs) are becoming more and more common. Tied to high-deductible health plans, these accounts have a lot of myths surrounding them. In some cases this may cause people to not take advantage of their benefits. Let's examine the seven most common myths surrounding HSAs.
Myth #1: With HSAs, you use it or lose it.
This common misconception comes from the similar sounding FSA (flexible spending account). FSA plans require that you use your funds each plan year. But HSAs are your money to keep permanently. You can use them to pay medical expenses now, pay off your future medical bills or stash your cash to pay for healthcare in retirement. And if you have funds left when you pass away, your beneficiaries will inherit those funds.
Myth #2: HSAs are tough to use.
HSAs are actually fairly simple to setup and use. When you're making healthcare enrollment decisions, enroll in a high-deductible health plan and you can sign up for an HSA. Look at your average out-of-pocket medical expenses to figure out what amount to contribute. During the plan year, you can decide how to use the funds. Some people choose to invest their HSA funds while others use those funds to pay for medical expenses whenever they crop up. To use your funds you simply swipe your HSA card (which acts like a debit card) or give the account info to your provider when you need to pay (such as filling out a form on a bill).
Myth #3: HSAs are only for medical expenses.
In general, this is true. If you use your HSA for medical expenses, the withdrawals are tax free and penalty free. However, once you turn 65 you have an option. You can continue to use the funds tax free and penalty free for eligible medical expenses. You can also withdraw your HSA funds with no penalties!
Myth #4: HSAs only apply to medical bills like hospital bills.
While it's true that HSA funds can be used to pay medical bills like a hospital stay, you can also use HSA funds for things non-hospital bills such as your out-of-pocket costs for prescription medications or acupuncture.
Myth #5: If you change or lose your job, your HSA funds are gone.
This one is patently false. They're your funds to keep and use no matter where you work. If you leave your job, you may want to change HSA providers, but you won't lose your money.
Myth #6: You need to save receipts when you use HSA funds for the IRS.
This one is false, too. There is no requirement to show proof of what you spent the funds on to the IRS. You may find it handy to keep receipts on hand (or upload them to your HSA provider) to ensure those expenses get reimbursed.
Myth #7: HSA funds won't grow.
If you hold onto your HSA funds you'll find that your plan provider offers investing options. These vary by provider, but typically once you reach a certain dollar threshold, you can invest your HSA funds. This is a great way to invest since you won't pay taxes on any HSA fund earnings.
While HSAs may not be for everyone, don't let one of these common myths keep you from checking out the HSA plans that may be available to you.
Disclaimer: All content in this presentation is for informational purposes only and is not intended to provide tax, legal, insurance, investment or other financial advice. No part of this presentation should be construed, explicitly or implicitly, as an offer to sell, a solicitation of an offer to buy, an endorsement, guarantee or recommendation for any financial product or service.