HSA

A Health Savings Account (HSA) is a tax-advantaged savings account that is created for people who get their insurance coverage through high-deductible health plans (HDHPs). 

Regular contributions to the account are made by the employee or employer and can be used to pay for qualified medical expenses that are not covered by HDHPs.

The contributions, which have an annual cap, can be used to pay for medical, dental, and vision care as well as prescription drugs.

The largest benefit of an HSA is by far the tax benefits, as no tax is levied on contributions to an HSA, on the HSA’s earnings, or on distributions used to pay for qualified medical expenses. 

Here are the tax benefits of traditional and roth investment accounts compared to an HSA:

• Traditional - Tax free contributions
• Roth - Tax free withdrawals
• HSA - Tax free contributions and withdrawals

Many are surprised to learn that you can invest your money in the stock market within an HSA. This is just another benefit that makes HSAs a must have in every portfolio.

This means that you can have a portion of your HSA in cash like a savings account, while also having another portion invested in stocks like an IRA.

Unlike a 401(k) or IRA, an HSA does not require the account holder to begin withdrawing funds at a certain age. The account can remain untouched as long as you like, although you are no longer allowed to contribute once you enroll in Medicare.