This Private Account Could Save You Financially – Do You Have One?
(DailyDig.com) – With the price on literally everything increasing, it can be hard for people to save money. A health savings account (HSA) offers financial breaks that might make a big difference for people with high or recurring medical expenses. Many of the perks come in the form of three tax advantages. Here’s how to utilize such an account.
HSAs offer three tax-free opportunities:
- Withdrawals, and
Financial advisors claim HSAs are a great way for people to pay for medical costs when they’re older, but they can also help investors of all ages build wealth.
Here’s the best way to use a health savings account, which offers a triple-tax advantage. https://t.co/9XJgayp69S
— CNBC (@CNBC) May 27, 2022
People with HSAs pay for medical expenses out of pocket, keeping the receipts to reimburse themselves later down the road. While the option allows for tax-free withdrawals for approved medical expenses, account holders can withdraw funds for reasons outside of medical expenses as long as they pay income taxes on the money they take. In other words, an HSA can be similar to that of a 401K plan, at least in that sense.
Andy Baxley, a certified financial planner at Chicago-based The Planning Center, said its accountants don’t even see the plans as HSAs; instead, they see them more like retirement accounts with tax benefits. The best way to utilize an HSA is to contribute as much as possible annually and use it as an investment. Another benefit to utilizing an HSA and paying out of pocket is that investors can reimburse themselves, tax-free, for those medical expenses.
Save money and pay fewer taxes; HSAs are a win-win for anyone looking to establish some amount of wealth.
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