Health Savings accounts fund your future
Health Savings Accounts (HSA) are a great tool
If you have a health savings account available to you at you place of employment you have a great tool for effectively increasing your income. With a health savings account an individual can put money in an account tax free. This money is deposited into your account tax free. An individual pays no social security, Medicare, federal or local and state taxes on this money. In some cases this money can go into the account for less than fifty cents on the dollar! The employer benefits as well since they do not have to contribute to social security on the money they match to the government as well. Once in the account the money may be spent tax free as long as it is spent on medical expenses.
In the case of most health savings accounts debit cards are given to the employee to pay doctors, dentists, pharmacies, and other health care providers. As the money accumulates it is normally placed in an interest bearing account. Once the account has reached a threshold money can be invested in a host of investments such as mutual funds.
Upon reaching the age of 65 the money accumulated is very similar to an IRA. An individual may withdraw the money to use as they see fit being required to pay taxes on the money. If an individual wants to withdraw the money before the age of 65 they must pay taxes on the money in addition to a 10 percent penalty. An individual may withdraw money at any time tax free to pay for qualified medical expenses.
There is currently more flexibility than ever before from these accounts. If you have a higher deductible on you health insurance plan You may be able to obtain a health savings account on your own through your bank or credit union. I have found if your employer sponsors a plan they often negotiate a better deal than you can on your own.
HSA are a good deal!
So what are qualified medical expenses?
The answer to that is almost any medially required expense. To most people the list is surprising ranging from dental fees to mattresses and over the counter drugs. There are too many qualified medical expenses to list here.
If you do not need the money for medical expenses you have an excellent retirement tool. A family may contribute up to $6150 per year in 2010 and $1000 additional for those over fifty five. Most plans have mutual funds available to the participants similar to those offered in a 401K.
If you choose to use this plan as a retirement tool you will have a tremendous advantage over a 401K. With a health savings account you will never have to pay tax on the money used for medical expenses. Just ask any retiree how much they spend a year on medical expenses.
As with any investing plan develop your own asset allocation and invest in the best funds in those asset classes. Once the investor has their asset allocation select the best small cap, best mid cap, large cap,global, bond, balanced and even concentrated portfolio funds for their portfolio.