Seven Common Misconceptions About Health Savings Accounts

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There are many ways to get health insurance and a wide variety of plans to consider before making a choice. While many people may overlook a health savings account (HSA) because of some misconceptions, they may be just what you and your family need.

About an HSA

An HSA serves two purposes: it helps you save for medical bills, and it helps save for retirement. Other HSA benefits include having tax-free money when used for medical expenses, and it provides coverage for many things that many health plans do not.

Before buying an HSA, you must get a high-deductible health plan (HDHP). It will have a minimum $1,600 deductible for an individual and $3,200 for a family. Your employer might offer these plans, or some banks will offer them. The deductible is higher than traditional health plans, which means you will pay more out-of-pocket costs, but it also means you have lower premiums.

Tax Benefits

Any money contributed to an HSA plan is tax-deductible—up to the contribution limits. Like other retirement accounts, you pay taxes when you withdraw the money in retirement. Money from the account can be used at any time for medical purposes without a penalty, but withdrawals for other things will be penalized until you are 65.