Can Investing in a Health Savings Account Save you Money?

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This is a guest post by Eliza Morgan

Getting sick is expensive. For those of us that are lucky enough to have medical health insurance, we get some sort of financial relief. But deductibles continue to get higher and higher, which means out-of-pocket expenses can still be pretty steep. Not to mention, without careful research, you may just consent to a procedure that is not covered by your insurance and get stuck with a hefty bill. In other words, you need to be prepared for unexpected medical costs.

A good way to ensure that you always have a nest egg in case an unexpected medical expense arises however is to add on a health savings account through your coinciding bank and health insurance plan. A health savings account (HSA) allows insurance members to choose how much money is removed from their pay checks each month. That money is then placed on a health debit card that members can use at any time, as long as it’s used to pay for medical bills and related services, such as prescriptions and co-pays.

It’s designed to save you some money (not a huge number but a good amount) because the money is removed from your check before taxes are taken out. It also grows in the account tax free. Thus, depending on how much you allow to be taken out of your check each month will determine how much you actually save. It’s great for those that already know they have costly procedures coming up that their health insurance will not entirely cover. That said, to learn some additional pros (as well as some cons of an HSA) and to see if it can save you some money in the long run, continue reading below.

Pros

• Roll Over Funds: The funds allocated on your health insurance debit card are carried over to the following year. This means you don’t have to hurry up and use the money before the year is up and will have an even bigger cushion the following year— i.e. there is no “use it or lose it” policies. And if you happen to switch jobs or healthcare plans, you still own the account through your bank. So your money is protected.

• Possibility of Further Investments: Similar to an IRA, an HSA can actually be invested. So once a member turns 65, he or she can make withdrawals for medical expenses tax free while non- eligible medical expensive will be taxed regularly. You also have the ability to transfer money from your existing IRA to your HSA.

Cons

• High Deductibles. In order to be eligible to make a HSA you have to have a healthcare plan with a high deductible; At least $1200 (single) or $2,400 family.

• Added Fees. Almost all HSAs require annual or monthly fees to keep the accounts open. They typically aren’t much, about $5 a month, and usually go away once you cross a certain amount of threshold.

*Since it’s a New Year, most insurance plans are giving members the opportunity to add HSA by the end of January. So if you wish to add one and to see if you’re eligible, it’s important to start looking into it now.

About the Author: This is a guest post by Eliza Morgan who is a full time blogger. She specializes in writing about business credit cards. You can reach her at: elizamorgan856 at gmail dot com.