You might already be aware that coupling a high deductible health plan (HDHP) with a health savings account (HSA) has some awesome perks, especially for people who rarely see the doctor.
An HDHP has a low premium so you don’t have to pay for coverage you don’t need. But even if you’re healthy, there’s no telling when you could catch a bug or need to see the doc. And under this plan, you would have to pay more out-of-pocket.
That’s where your HSA can save the day. The cash you have sitting in your account can be your knight in shining armor, swooping in to cover unexpected medical expenses.
Here are a few common HSA myths debunked, so you can start socking away even more for your health and wealth (right now!).
Myth #1: Money in an HSA is just like money sitting in any ol’ savings account.
Saving in an HSA is not like saving in a typical savings account. There are serious tax perks and a real potential for account gains associated with HSAs. In fact, they’re often referred to as a tax-shelter because you can make tax-free contributions, spend the money tax-free (as long as it’s used for approved medical expenses), and the money grows in your account, also tax-free. How’s that for a triple threat?
Plus, you can choose to maximize your HSA by investing some funds in low-cost ETFs. Stashing money away for medical costs may not seem like a big deal when you’re relatively young, fit, and healthy, but the cash stockpile can become an asset as you age.
Myth #2: You can’t roll over money to the next year.
Guess what? You can absolutely roll over money that you don’t use. The “use it or lose it” rule is a feature of the Flexible Spending Account or FSA, not an HSA, which can cause some confusion. You also get to take your HSA with you if you get a new job. The HSA investment and rollover superpowers can make it a key part of your retirement plan.
Myth #3: Only doctor visits and prescriptions are eligible.
In reality, there are many expenses that your HSA can pay for besides prescriptions and regular doctor visits. You can use your HSA to pay for dental and vision expenses, acupuncture, breast pumps, first aid products, over-the-counter pain relief like Advil and Tylenol, and so much more. Recently, menstrual products were also added to the list. Oh, and if you’re contemplating therapy, but worried about the cost, your HSA can cover that too! Check out a full list of eligible expenses here.
Myth #4: Managing an HSA is too complicated.
At one point in time, managing an HSA could have seemed like a good idea but a lot of work. To get reimbursed, you had to read through (often confusing) IRS rules and decode what was eligible. You also had to keep all of your physical receipts. *Sigh*
Fast forward to today and the process is a lot less archaic. Plus, there are websites like the HSA Store that only sell eligible products, so not only is it easy as ever to purchase what you need, but you can be sure that you won’t get hit with a tax-penalty down the line.
With Starship, you also get a beautiful Visa Debit Card, so swiping in-store or ordering online is super easy. You can also reimburse yourself from within the app by snapping a photo of your receipt!
Myth #5: You can only use funds on yourself.
You can actually use HSA funds on your spouse and dependents. But, Uncle Sam does ha contribution limits. For 2020, you can contribute up to $3,550 to your HSA if you have a self-only HDPH plan and $7,100 if you have family coverage. However, people over 55 can contribute an extra $1,000 on top of that.
Before opening an HSA…
Remember that HSA money will be taxed as income and you’ll incur a 20% tax penalty if you spend it on anything other than medical, and therefore eligible expenses. So you shouldn’t put every last extra penny into your HSA in case you need some cash for a non-health-related emergency… if you’re considering using your HSA as an emergency fund, be sure to get in on this further reading.
Now that we’ve debunked those myths: figure out an amount (monthly or otherwise) that you can afford to contribute, follow the HSA rules, and take care.