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Is a Health Savings Account right for you?

Family video chatting with a doctor.

If you’re looking to save for future health care expenses, it can seem like a daunting task. However, if you have a High Deductible Health Plan (HDHP), you can open and contribute to a Health Savings Account (HSA). These specialized savings accounts enable you to save money specifically for health expenses.

To qualify for an HSA, there are a few requirements you need to meet.

  • You need to be covered by a High-Deductible Health Plan (HDHP).
  • You need to be 18 years of age or older, with a valid Social Security Number and a primary residence in the U.S.
  • You cannot be enrolled in any other type of health plan, including Medicare.
  • You cannot be eligible to be claimed as a dependent on another individual’s federal income tax return.

Like any healthcare option, there are advantages and disadvantages to HSAs that you need to consider. Before enrolling with an HSA, think about what healthcare options you may need in the coming year as well as your budget constraints, before determining whether an HSA is right for you.

Advantages to an HSA

Here are a few key benefits people have seen using HSAs:

  • You have control over how much money to set aside for health care costs and how your money is spent.
  • Your employer may contribute to your HSA, but you own the account. The money is yours even if you change jobs.
  • Any money you don’t use stays in your account for you to use in the future. There’s no-use-it-or-lose-it policy.
  • Contributions are made with pre-tax dollars, and your account grows tax-free too.
  • Your HSA funds can also be used for your spouse's and qualified dependents' medical costs.

Disadvantages to an HSA

There are some key drawbacks to consider:

  • It may be difficult to accurately budget for health care expenses because illness and injury are so unpredictable.
  • Information about the cost and quality of medical care can be difficult to obtain.
  • It can be difficult to set aside money into an HSA, especially with ongoing health complications or a limited income.
  • You may feel pressured to put off necessary medical care in order to save the money in your HSA.
  • If you take money out of your HSA to use for non-qualified expenses, those funds will be subject to income taxes and there may be tax penalties as well.

HSAs may not be right for everyone, but they can be a great tool for those who will benefit. At Bank of Colorado, we offer HSAs and would be happy to help you set up your account at any time. To learn more, click here or stop by your local branch.

This article is intended to provide general information regarding HSAs. It is not intended to provide legal advice or a detailed explanation of the rules or how such rules may apply to your individual circumstances. For specific information, you are encouraged to consult your tax or legal professional.

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