HealthEquity Debunks Common Health Savings Account Myths
“HealthEquity is proud to be one of the first HSA administrators to provide access to member-level investment advisory services, continuing our commitment to helping people use pre-tax savings to pay for their healthcare,” said Dr.
The benefits HSAs provide have already led to bipartisan support as part of a solution to improve the U.S. healthcare system. Putting money away for health expenses should be as simple as it sounds, but there is still confusion about HSAs.
- Myth #1: HSAs are complicated: Despite what you may have heard, HSAs are a simple way to reduce taxable income and cover qualified healthcare expenses. Yes, anything healthcare related can be complex, but these pre-tax savings accounts are one of the easiest ways for Americans to put more in their pockets and protect their future.
- Myth #2: HSAs are one-dimensional: An HSA can be used for saving and spending, tackling both sides of the medical-expense issue.
- It works like a savings account with a debit card – you put money in and use the card to pay for healthcare expenses.
- There’s no use-it-or-lose-it rule; funds can build up year-over-year and that money can be spent on medical bills when they arise.
- It’s a smart way to save on taxes because contributions are collected before taxes, lowering federal gross income.
- Investment growth is tax-free[†].
- Withdrawals are tax-free when used for qualified medical expenses.
- Myth #3: HSAs and 401(k) plans don’t really work together. It’s true they don’t have to work together, but they are complementary savings vehicles that can be managed together to prepare for retirement income and expenses. When a 65-year-old couple retiring today can expect up to
$350,000in out-of-pocket healthcare expenses in retirement, the more tax-free‡ dollars saved for healthcare, the better.
- Myth #4: HSAs are only for rich people (and wealthy companies): The average American can afford an HSA. With the ability to reduce taxable income by as much as
$7,000per household, the average American can’t afford not to. Everyone has medical expenses, and HSAs work for everyday workers. It gives them a tax-advantaged way to cover medical bills and you a tax-advantaged way to help.
- Myth #5: HSAs are designed for Baby Boomers: Nearly 77% of people who contribute to HSAs were born after 1964 – and almost half of all those who contribute are millennials. Only 17% of HSA contributors are Baby Boomers, demonstrating once more that HSAs aren’t just for your older, wealthier employees.
- Myth #6: HSAs are nothing but a tax shelter for the wealthy: The average annual contribution in 2017 was
$1,538– well below the annual limits, which, for 2020, range from $3,550for an individual to near $7,100for a family. If HSAs aren’t merely tax relief, they’re a sound and sure way to save.
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[†] HSAs are never taxed at a federal income level when used appropriately for qualified medical expenses and most states recognize HSA funds as tax-free. Please consult a tax advisor regarding your state’s specific rules.
Source: HealthEquity, Inc.