We talk a lot about the importance of a comprehensive healthcare plan, but for many people, the choice comes down to price. You might already know that lower-deductible plans generally command higher monthly premiums, and the reverse is also true. Plans with lower premiums have higher deductibles. Many younger or healthier people opt for the lower-premium plan, and hope that they don’t have to meet their deductible in any given year.
But of course, the deductible is always a risk factor. In the event of one serious injury or illness, you might be responsible for meeting the entire deductible before your insurance kicks in to cover the rest. If the thought of coming up with $6,000 or so triggers apprehension, there might be a solution that helps your budget concerns while providing other distinct benefits.
It’s called a health savings account, or HSA for short, and it’s available only to consumers enrolled in certain high-deductible healthcare plans. If you’re eligible to open an HSA, you will be able to make pre-tax contributions to the account. The funds in your account will grow over time, according to your contributions, and they can then be used for qualified medical expenses such as your deductible.
Along with helping you budget for a major medical expense, an HSA offers other distinct advantages. First, because your contributions are made on a pre-tax basis, you will actually be lowering your taxable income for the year.
Second, because unused funds in the account will roll over each year, you could consider your HSA another form of retirement savings. The account can be rolled all the way into retirement, if you don’t use all of the money within it, and then the account can be accessed to pay for qualified medical expenses at that time. Considering the fact that a retired couple’s projected medical expenditures amount to over $265,000 throughout their retirement years, we could all use any help we can get to prepare for the future!
If a health savings account sounds like a good solution for your budget concerns, give us a call to learn more.