Your health savings account (HSA) is one of the best kept secrets of health insurance. It’s free money to use however you’d like. No longer are you paying into a plan that specifies how your money will be used to help you. With an HSA you simply put the money away, let it add up, and it’s there when you need it most. Sounds pretty great, right? Using your benefits strategically is the best way to ensure you maximize your HSA.
Make sure it’s an HSA.
There are two popular accounts, HSA and FSA. Make sure you’re is an HSA. While an FSA can be valuable, it has a use-it-or-lose-it provision, where you must use the funds or you lose the money. An FSA doesn’t have this, so you reap the benefits of rolling over unused funds year after year. (Of course, if you have both that’s great too).
Even if it’s not much, start contributing right now. It’s too late to add funds to the HSA after you’ve already broken your leg and end up in the ER. Add a few dollars now, then after you break your leg, you can add more – and pay your bills with tax-free money.
Understand Tax-Free Money.
Many people underestimate the power of tax-free money. Let’s say you have a $500 medical bill that is due. The money in your checking account has already been taxed. The money in your HSA account has not. If you use your HSA to pay the $500 bill, you are actually using more of the money you earn while keeping your checking account in the black.
Think long term.
Because your HSA account never expires, think long term. Think retirement homes or long-term care facilities. Think Medicare premiums. If you’re young and healthy, don’t waste your HSA on things that you can afford to pay for out of pocket.
Understand Rollover Options.
If you plan to use your HSA for retirement, you can roll the balance into another HSA once a year. This is a valuable option because it can gain you more dividends and lower fees.
Name a beneficiary.
Over time, your HSA account can accumulate to quite a bit of cash. If you don’t have a beneficiary named, in the event of your death, the money is tied up in probate. Be sure you recognize it for the asset it is and name a beneficiary in your estate documents.
Use Preventative Care.
If you have a high deductible health insurance plan with an HSA you likely have full coverage for preventative care. These plans are set up this way so you can stay in control of your own health. Get the care you need to keep you healthy and identify small issues before they become expensive conditions. If you are diagnosed with an expensive condition, consider switching to an alternative insurance option.
Keep your receipt.
If you’re not sure whether an expense is worth using your HSA funds on, pay for it out of pocket but keep the receipts. You can be reimbursed for medical expenses later on through your HSA if you change your mint.