Want to get the government to pick up part of the tab for your health care AND lower your taxes while at the same time maintaining control of your own health care AND taking personal responsibility for yourself and your family?
Then a Health Savings Account (HSA) is exactly what you need.
An HSA works exactly like a 401K plan. Money that you earn is deposited into an account that is invested into various mutual funds where it will make gains or losses depending on the market. Provided you withdraw the money for an approved health expense, there are no penalties for withdrawal.
The real bonus to an HSA however, is that money is TAX FREE! Consider that for every dollar you have in your pocket right now, you have had to earn about $1.30 when factoring in state and federal taxes. This number will vary depending on your income, but for now we will assume a 30% tax burden. So if you spend $50.00 on a deductible for a doctor visit, you will have actually spent $65.00 because of the taxes you have paid on that 50. The beautiful thing about an HSA is that you avoid paying the initial $15.00 in taxes.
An HSA is NOT an insurance plan. Chances are that if you’re reading this then you already have health insurance. Depending on the type of health insurance you have, you pay a deductible for health services and also have co-pay for prescriptions. Your HSA can be used to supplement your existing coverage for those expenses that are not covered by your insurance. This is a nice way to supplement your insurance plan AND get Uncle Sam to help you out. Most HSA’s will also cover over the counter expenses. Things like aspirin, band aids, ointments, contact lenses, saline solution, birth control, asthma treatments, dentist visits, doctor visits, OBGYN, specialists, and eye doctors are covered under an HSA. Some accounts even cover things like acupuncture therapy and reconstructive surgery.
I am lucky enough to have a comprehensive benefits package at my job, and my employer offers an optional HSA plan. More and more employers are offering these plans due to the rising cost of health care as an alternative to expanding coverage under a traditional insurance plan. Even if your employer does not offer an HSA plan, you can get a private plan for yourself and pay just a small monthly premium ($5 to $20 monthly). You will still be saving money because that monthly fee is most likely less than you pay in taxes when you buy eyeglasses, contact, or doctor visits for your kids out of pocket.
When you sign up for an HSA, you are given a debit card for the account. Provided you spend the money on one of the many approved accounts, the money is taken out of you HSA without penalty and, more importantly, WITHOUT TAXES! This is an immediate 30% savings on your health care costs and neither your premiums or your taxes have gone up one cent! Even if you’re like me, a stubborn jerk who refuses to go to the doctor , you still pay close to $1,000 per year for health care and don’t even realize it. Combine that with taxes and you’re spending $1,300 on health care. So why not take advantage of Uncle Sam’s generosity and put that $300 in your pocket?
Another argument in favor of HSA’s is the investment aspect. Now granted, it is not exactly a great time to own stocks or funds, but if you look at March through October of 2009, there have been significant gains in the mutual fund market. So while your tax-free money is sitting in your HSA, it’s hard at work for you making gains on average of 10% per year. Even if you factor in the Great Depression and the Mortgage Collapse of 2008, the stock market has gained money on average since it was first created. Those gains by the way, are also tax-free provided they are spent on approved expenses.
There is a good deal of finger pointing and protest going on these days about who should pay for heath care. The policy debate could go either way, but in the mean time, why not stop giving money to the government and start saving 30% on your out of pocket health care expenses. It’s certainly a more tangible savings than anything a politician on either side might promise you.
~Man Overboard
Image Used in this Post
Prescription Drugs courtesy of Flickr user Nirbhao published under the CC license.
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Lower Health Care Costs and Taxes with Health Savings Accounts
Then a Health Savings Account (HSA) is exactly what you need.
An HSA works exactly like a 401K plan. Money that you earn is deposited into an account that is invested into various mutual funds where it will make gains or losses depending on the market. Provided you withdraw the money for an approved health expense, there are no penalties for withdrawal.
The real bonus to an HSA however, is that money is TAX FREE! Consider that for every dollar you have in your pocket right now, you have had to earn about $1.30 when factoring in state and federal taxes. This number will vary depending on your income, but for now we will assume a 30% tax burden. So if you spend $50.00 on a deductible for a doctor visit, you will have actually spent $65.00 because of the taxes you have paid on that 50. The beautiful thing about an HSA is that you avoid paying the initial $15.00 in taxes.
An HSA is NOT an insurance plan. Chances are that if you’re reading this then you already have health insurance. Depending on the type of health insurance you have, you pay a deductible for health services and also have co-pay for prescriptions. Your HSA can be used to supplement your existing coverage for those expenses that are not covered by your insurance. This is a nice way to supplement your insurance plan AND get Uncle Sam to help you out. Most HSA’s will also cover over the counter expenses. Things like aspirin, band aids, ointments, contact lenses, saline solution, birth control, asthma treatments, dentist visits, doctor visits, OBGYN, specialists, and eye doctors are covered under an HSA. Some accounts even cover things like acupuncture therapy and reconstructive surgery.
I am lucky enough to have a comprehensive benefits package at my job, and my employer offers an optional HSA plan. More and more employers are offering these plans due to the rising cost of health care as an alternative to expanding coverage under a traditional insurance plan. Even if your employer does not offer an HSA plan, you can get a private plan for yourself and pay just a small monthly premium ($5 to $20 monthly). You will still be saving money because that monthly fee is most likely less than you pay in taxes when you buy eyeglasses, contact, or doctor visits for your kids out of pocket.
When you sign up for an HSA, you are given a debit card for the account. Provided you spend the money on one of the many approved accounts, the money is taken out of you HSA without penalty and, more importantly, WITHOUT TAXES! This is an immediate 30% savings on your health care costs and neither your premiums or your taxes have gone up one cent! Even if you’re like me, a stubborn jerk who refuses to go to the doctor , you still pay close to $1,000 per year for health care and don’t even realize it. Combine that with taxes and you’re spending $1,300 on health care. So why not take advantage of Uncle Sam’s generosity and put that $300 in your pocket?
Another argument in favor of HSA’s is the investment aspect. Now granted, it is not exactly a great time to own stocks or funds, but if you look at March through October of 2009, there have been significant gains in the mutual fund market. So while your tax-free money is sitting in your HSA, it’s hard at work for you making gains on average of 10% per year. Even if you factor in the Great Depression and the Mortgage Collapse of 2008, the stock market has gained money on average since it was first created. Those gains by the way, are also tax-free provided they are spent on approved expenses.
There is a good deal of finger pointing and protest going on these days about who should pay for heath care. The policy debate could go either way, but in the mean time, why not stop giving money to the government and start saving 30% on your out of pocket health care expenses. It’s certainly a more tangible savings than anything a politician on either side might promise you.
~Man Overboard
Image Used in this Post
Prescription Drugs courtesy of Flickr user Nirbhao published under the CC license.