Making the most of your HSA
As health savings accounts (HSAs) become more popular with employers and employees, you should be well-informed about the benefits and rules around this option. For example, did you know you can use an HSA as a savings/investment tool? Most HSAs are tax-advantaged, offer investment options and you can use them in retirement planning.
So, what else do you need to know? To get the most out of an HSA, you need to understand some of the long-term benefits of this health care savings strategy and what options are available when you sign up for an HSA.
Move past the “use it or lose it” mentality
HSAs are different than flexible spending arrangements‡ (FSAs), because your unused HSA balance rolls over from year to year so you will not give up the money and your account may grow over time. FSA funds that aren’t used by the customer within a certain time period are lost.Here is an example of how an HSA can be used to save for future expenses.You’re a generally healthy, 20-something male who doesn’t have many major health care expenses. You would like to save for future health care expenses for when you start a family or possibly for when you are closer to retirement age and are more likely to have substantial health care costs. You should consider an HSA.
Take a long-term view
Eligible HSA deposits are tax-deductable, earnings grow tax-free‡(1), and withdrawals for qualified medical expenses are tax-free1. These features may make the HSA a more appealing choice than other tax-advantaged financial instruments such as an IRA‡. With an IRA, you will pay income tax on your withdrawals used to pay for medical expenses and you may have to pay a penalty for withdrawing money too early. If you withdraw from an HSA for a non-qualified medical expense, you will have penalties and tax implications similar to an IRA.Many HSAs offer investment options. You can invest part or all of your HSA into money market accounts‡(2),or self-directed brokerage accounts (3) for mutual funds‡ or individual stocks. Like all investments, other factors will determine the actual returns on those made within an HSA, but the reality is that these options are underutilized by most HSA accountholders.
Learn more and determine next steps
If your company offers a high-deductible health insurance plan with an HSA, talk to your benefits department about what is included with the HSA. Determine if an HSA is right for you at the time. Many benefit partners will offer “people like me scenarios” to give you a better idea of how you can benefit from an HSA.Here is another example of how an HSA can be used to save for future expenses within a shorter timeframe.
You’re a woman in your 50s and you are preparing for your retirement in the next 10 to 15 years. You have noticed that your health issues are more frequent and more expensive. You realize that the HSA makes the most sense for you to start investing in now, while you’re still eligible. You also learn that you can make a catch-up contribution to your HSA since you are over age 55. It’s not too late for you to consider an HSA.
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UMB CFO Mike Hagedorn discusses the innovation of HSAs and how they have become an important part of the payments industry. He explains the distinction between product and innovation and how a company can poise itself to be a leader in innovation.
1All mention of taxes is made in reference to federal tax law. States can choose to follow the federal tax-treatment guidelines for HSAs or establish their own; some states tax HSA contributions. Please check with your state’s tax laws to determine the tax treatment of HSA contributions, or consult your tax adviser. Neither UMB Bank n.a., its parent, subsidiaries nor affiliates are engaged in rendering tax advice.
2 Contributions up to the $1,000 peg balance are FDIC insured. Any funds over the peg balance that are swept into a money market mutual fund are not insured or guaranteed by the FDIC or any other governmental agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market mutual fund.
3 Investments made through your HSA Self-Directed brokerage account are not FDIC insured. Investments offered through UMB Financial Services, Inc., member FINRA, SIPC. UMB Financial Services, Inc. is a subsidiary of UMB Bank n.a. UMB Bank n.a. is a wholly-owned subsidiary of UMB Financial Corporation. UMB Financial Services, Inc. is not a bank and is separate from UMB Bank n.a. and other banks.
Investments in securities, whether through the money market sweep account or through other investment options available in the self-directed brokerage account are:
Not FDIC-Insured · May Lose Value · No Bank Guarantee
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Dennis Triplett is chief executive officer of UMB Healthcare Services. He is responsible for the strategic direction in healthcare banking and manages the sales and marketing activities, plus product development and relationship management. Dennis has more than 29 years of experience in the banking industry. He currently serves as board chairman for the Employers Council on Flexible Compensation, chairman of America’s Health Insurance Plans’ HSA Leadership Council and a charter member of the American Bankers Association’s HSA Council.