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The Inside Scoop

Insights on how to work the health care system and be a more savvy shopper.

Why the HSA is the best deal around

A dollar in a Health Savings Account (HSA) is worth more than a dollar in your pocket. So if you’re eligible for an HSA with your medical plan, you should run (not walk) to set it up.

HSAs have triple tax benefits like no other account—not even a 401(k)!

Put money in … NO TAX.

Take money out for eligible medical, dental, and vision expenses … NO TAX.

Earn interest or investment income on the account … NO TAX.

Normally, for every dollar you earn, about 25¢* is taken out for Uncle Sam. That’s right—about one-fourth of your money is spent on taxes and never even makes it to your pocket. But in the HSA, you get to keep the whole dollar. That may not sound like a lot, but think about how many dollars you put in the HSA. Let’s say you’re single and contribute the maximum amount over the course of a year. There could be another $800* more in your account than there would be if you had the money as cash … and that’s just after one year!

Although you can take the money out of your HSA at any time to pay for eligible expenses, there are extra advantages when you don’t. Think about it … if you can afford to pay for health expenses using other sources, the money in your HSA will continue to grow and earn interest. That could add up to thousands or tens of thousands of dollars in your account over the years. (You could also potentially build your account by investing the money in your HSA.)

And even if you can’t afford to leave the money in your account because you need it to pay for expenses now, it’s still a better deal to use tax-free dollars in your HSA over cash.

So if you aren’t already using an HSA, you should find out whether you’re eligible for one (based on your medical plan) and set up automatic contributions from your paycheck as soon as possible. Get started by visiting your enrollment website. Whether you can save money for the long haul or use it as you go, it’s a great way to save on health care expenses.

* This example assumes you are in a 25% tax bracket, covering just yourself and contributing the maximum to your account. Depending on your tax bracket and contributions, your savings could be more or less.


 
Benefits and services available may vary from plan to plan—please refer to your plan’s Summary Plan Description for exact coverage details. This article is not intended to provide medical advice. Aon does not recommend or endorse a particular course of medical treatment. If you have any questions concerning your medical condition or any drugs, treatment plans, or new symptoms, consult your health care provider.
 
© Aon plc 2015. All rights reserved.
 

Tags: 401(k), save, taxes
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