4 Common HSA Questions (And Answers)
If you’re considering opening an HSA, chances are you may have asked one or more of these questions. Here’s how we answer them:
1. Won’t I spend more money on a high-deductible health plan (HDHP) than I would on a traditional healthcare plan?
To be eligible to make HSA contributions, you need to be enrolled in a high-deductible health plan. And, you guessed it, HDHPs often have higher deductibles than traditional healthcare plans. However, HDHDs typically also have lower premiums than other plans, which can save enrollees hundreds of dollars each month. Instead of having to pay high premiums for coverage they may not use, HDHPs allow enrollees to shift resources towards their actual healthcare costs.
Also, enrolling in an HDHP is one of the requirements for becoming HSA-eligible (more about HSA eligibility here). And HSAs offer unparalleled tax benefits as the most tax-advantaged medical savings vehicle on the market. So an HDHP will save you more money by allowing you to make HSA contributions and start taking advantage of their triple tax benefits.
2. Wouldn’t it be better to keep my money where I can use it for more than just medical expenses?
It’s certainly prudent to have multiple savings vehicles, but you’re going to need to save for medical costs. In the past 35 years, the inflation rate for medical care service was double the inflation rate for all items. And on average, Medicare only covers 59% of healthcare costs after retirement. If you retire this year at age 65, you could need up to $280,000 to cover your retirement medical expenses.
Here’s where HSAs come in. HSAs funds aren’t taxed when they’re contributed, as they grow, or when you withdraw them to pay for qualified medical expenses. That triple tax benefit makes HSAs the ideal vehicle for saving for medical expenses.
And, when you turn 65, you can use HSA funds to pay for non-medical expenses; you just have to pay regular income taxes like you would with a 401(k). And, if you pay for medical expenses out-of-pocket and keep your receipts, you can reimburse yourself down the road and use those tax-free HSA dollars for whatever you want, no questions asked.
3. Will having an HSA make me less likely to go to the doctor, even when I should?
HDHPs do give individuals the full cost of medical expenses before they reach their deductibles (which you can pay with your HSA). Sometimes, that can make people unwilling to get medical attention. However, HDHPs fully cover preventative care. The more people take advantage of those covered services, the less likely they’ll be to have an unexpected major medical expense.
Also, with a bit of research, you’ll be surprised to find how much you’ll be able to save on healthcare costs. Just by asking for cheaper alternatives and letting your doctors know about your coverage, you’ll be able to cut medical expenses. Here are 8 simple ways you can start saving today on medical costs.
4. Wouldn’t it be better to invest my money instead of putting it in an HSA?
Great question! Turns out you can invest your HSA funds and let them grow long-term like a 401(k) or IRA. Not all HSA providers offer this option, but at HealthSavings, we’re proud to offer a full mutual fund lineup with over 100 investment options, including funds from Vanguard, Dimensional, Franklin Templeton, and more.
Many HSA providers won’t let you invest your funds until you reach a certain limit, but at HealthSavings we believe every dollar should have the chance to grow for you. We offer first-dollar investing with no minimum balances or investment transaction fees for all of our funds.
Ready to open an HSA and start investing? Sign up here.