A Health Savings Account (commonly referred to simply as an HSA) is a healthcare product offered by many employers and health care insurance providers. While not all individuals are eligible to open an HSA, many high deductible insurance plans are accompanied by an HSA.
Just like your bank checking account, you receive a physical debit card for your HSA. Your HSA card can only be used to make qualifying medical purchases (as defined by your insurance provider) but can be a great tool for saving money and budgeting accordingly.
How much money is available in my HSA?
YOU choose how much money you contribute to your HSA. Money is deducted from your paycheck (often pre-tax if this is done through your employer) and placed in the account. Just like a bank checking account, this money adds up over time and is only deducted when you make a purchase with the card.
Unlike a Flexible Spending Account (which is a similar but distinctly different product) the money you deposit into your HSA never expires. Even when you turn 65 and enroll in Medicare or if your employer discontinues providing an HSA eligible insurance plan your money will still be available (though you may no longer be able to contribute additional funds).
For 2022, the annual contribution limit for an HSA is set at $3650 for an individual insurance plan or $7300 for a family plan. Because this money is often deducted from your paycheck before taxes are taken out of your paycheck, it has a similar tax advantage to contributing to a 401K.
How do HSA’s assist in retirement planning?
If you start contributing to an HSA prior to retirement, you have the opportunity to build up a substantial balance if you choose to. Money set aside in this account can be a powerful retirement tool to complement Medicare coverage. Because there are plenty of services Medicare does not cover, an HSA plan can be a great backup plan to help fill in the gaps.
Can I buy health products with my HSA?
Yes! Not only healthcare services and prescription medications but also many health products are eligible to be purchased with an HSA. Supplements sold at our clinic are a great example, but Amazon also has an entire category of products that can be purchased with your HSA. You can see this part of Amazon’s website here.