Did you know you can use your health savings account (HSA) like a piggy bank to save money for a vacation or if you need some cash?
If you have a high deductible health plan (deductible over $1,400 for an individual or $2800 for a family in 2020), you may qualify for an HSA.
“A health savings account is triple tax advantaged in that the money goes in tax free, it grows tax free and if you take it out for health care expenses, it comes out tax free,” said Jen Jones, Premera director of compensation and benefits.
When you have qualified medical expenses, like costs applied to your deductible, coinsurance, or supplies at the pharmacy, you can either pay for that from your personal bank account or a tax-favored account like an HSA. Both options are your bank accounts.
“If you can afford to pay the bill out of your personal bank account, you could leave your money that is in your other tax favored account so it can grow,” Jones said. “Either way, you are paying with your money, so might as well pay from the account that isn’t going to reap tax benefits.”
If you do have qualifying medical expenses and pay for them out of pocket, you will be able to tap into that money in the future if you need it. That’s how marketing communications consultant Jennifer Robertson says you can save for a vacation, holiday gifts, or an unexpected expense.
You can claim any money spent out of personal funds from your health savings account at any time. Those funds are always available to you for reimbursement.
When you sign in to Premera.com to manage your HSA, instead of using the pay your provider option, you can elect to Save It. That will keep a record of your expense. You can also hold onto your receipts in case you’re ever asked to prove what you spent that money on, Robertson advised.
Remember, unlike a flexible spending account, an HSA is always yours, so don’t lose track of one you had with a previous employer.
Many people use their HSA like a retirement savings account. Once you hit age 65, you can use your HSA money for anything without penalty, but you will have to pay taxes if it’s not for health-related expenses.
Because of the triple-tax advantage, an HSA is an excellent benefit, especially coupled with other tax-advantaged accounts like your 401k.