Health Savings Account: Is It Worth It Having it?

Are you considering a Health Savings Account (HSA) but unsure if it's the right choice? There are approximately 36 million HSAs in the United States. While HSAs offer tremendous tax advantages when used properly, they may not be the best choice depending on your health coverage needs.
Let's break it down and crunch the numbers to help you decide.

What is an HSA?

An HSA is a tax-advantaged savings account paired with a high-deductible health insurance plan. You contribute pre-tax dollars, which grow tax-free, and can be withdrawn tax-free for qualified medical expenses.

How HSA-eligible plans differ from traditional plans

HSA-eligible plans typically have:
  1. Higher deductibles
  2. Lower monthly premiums
  3. Higher out-of-pocket maximums

The Math: Is an HSA Worth It?

To determine if an HSA is worthwhile, consider these factors:
  1. Premium Savings: Calculate the difference between your current plan's premium and the HSA-eligible plan's premium.
  2. Tax Savings: Estimate your tax bracket and multiply it by your planned HSA contribution.
  3. Expected Medical Expenses: Estimate your yearly medical costs.
  4. Employer Contributions: Add any money your employer contributes to your HSA.

If this value is positive, an HSA could be beneficial. Let's say:
  • Premium savings: $1,200/year
  • Tax savings (25% bracket, $3,000 contribution): $750
  • Employer contribution: $500
  • Expected medical expenses: $2,000
  • Current plan's coverage: $1,500

Value = ($1,200 + $750 + $500) - ($2,000 - $1,500) = $1,950
In this scenario, you'd save $1,950 with an HSA plan.
Remember, HSAs also offer long-term savings potential for future healthcare needs. Weigh these factors carefully to make the best decision for your financial and health situation.
For a detailed review of your health insurance options, contact my office today. Together, we can find a plan that meets your health needs and your budget.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2021 Advisor Websites.