Director of New Business for Advantage Administrators explains the pros and cons of HSAs.
Professionals typically choose to start a health savings account (HSA) through their job or on their own. Peter Foxhoven recently explained why an HSA may or may not be a good move. As Director of New Business for Advantage Administrators, he has firsthand knowledge of why HSAs can benefit certain people. However, he also says not everyone needs to get one.
Understanding a HAS
First of all, it’s essential to understand the health savings account, Peter Foxhoven says. An HSA allows people to pay their money into an account tax-free. That money can then accumulate interest that is also tax-free and be withdrawn for qualified medical expenses—all tax-free. He explains that this allows people to use their hard-earned money towards their healthcare expenses while avoiding also paying taxes on that money.
Most importantly, Foxhoven says, anyone getting an HSA should understand exactly what it will cover. “Knowing what it will apply to is a key part of determining if an HSA is ideal for you or not,” he says. “Sometimes people find that their HSA won’t apply to the costs they want to cover. So, knowing the details of the account limits is important for avoiding surprises down the road.” The HSA may not be the right choice for those who have unexpected out-of-pocket expenses frequently.
Peter Foxhoven says an HSA can help save a lot of money with a lower monthly premium for generally healthy people. Account-holders can use the money in their HSA account to pay for deductibles, copayments, and other qualified costs. While the deductible tends to be higher in these accounts, it can be offset by the savings collected in the HSA. As long as the individual is healthy, this plan can offer significant savings benefits, Foxhoven says.
Another way HSAs can be beneficial is when people have consistent health expenses. For example, those who have chronic conditions might take advantage of the tax-free money collected in the HSA. However, Foxhoven says this is best used when the account holder can accurately estimate costs and save accordingly.
“With the right approach, an HSA can be extremely helpful for saving money that goes towards those savings you already know you will have,” he notes. “While it can be a good account for a generally healthy person, an HSA can also be an excellent option for someone with consistent health concerns.”
He notes that the HSA will offer triple tax benefits when used correctly. “The right plan will allow you to roll over unspent money and could even offer a good retirement savings option,” Peter Foxhoven explains.