Retirement comes with many perks including a health saving account (HSA). An HSA is a savings account that may be used to offset medical expenses. One of the best things about health savings accounts is the fact that they are tax deductible. Here are five ways to make the most of your account.
1. Invest your HSA earnings
You have full liberality to invest your HSA in the same manner that you distribute funds in your 401(K). Many people choose to make their health accounts grow by putting money towards stocks and mutual funds. Some jump on the precious metals boat and coast into more money by investing small amounts in gold and silver. Just as with a 401(K) or other IRA, you should be mindful of where additional funds are going. You do not want to invest a large percentage of your HSA in a company that goes bankrupt months after your purchase stocks.
2. Take full advantage of qualified expenses
You can withdraw funds from your savings account to cover tax-deferred contributions and tax-free distributions. All of the fund removals, however, must be applied to qualified medical expenses (QMEs). You can potentially save thousands in out-of-pocket expenses related to health and wellness using your HSA as long as you keep the receipts.
3. Use distributions wisely
While an HSA potentially covers every expense related to health and wellness, you may not want to use your plan for small costs. Paying for recurring things such as prescriptions and annual doctor’s visits out-of-pocket gives your savings account the chance to build value, which may be used for emergencies when large payouts are necessary. You should use the distribution incentive sparingly when it comes to small expenses that you can technically afford to pay.
4. Utilize maximum contributions
Contributing the maximum amount to your HSA comes with incredible tax benefits. Your plan’s earning potential increases when you give the maximum dollar amount to your plan. You, then, have the right to deduct up to the full contribution amount from your tax bill, which means that you are not losing money when paying more into your HSA.
5. Study to be a better consumer
You should not choose the first HSA plan offered but rather compare several possibilities before making a decision. Reviewing your health habits is the first step to understanding what you need from an HSA plan. You may not need an account that offers the bells and whistles if you are someone who visits the doctor once a year. You may, however, require a premium plan if you have a preexisting condition that calls for several checkups and treatments throughout the year.
Implementing healthy lifestyle habits is the greatest way to get the most out of your HSA plan. The more that you consume wholesome foods and keep a good workout regimen, the less often you may have to see the doctor. An HSA plan has the potential to be a financial lifesaver during the retirement years if you work the system well.