List of Pros and Cons of Health Savings Account
In the United States, a health savings account, or HSA, is a tax-advantages savings account intended for medical expenses. Those who are enrolled in a qualifying high-deductible health plan are allowed to participate. The money contributed to an HAS is not subjected to federal taxation when it is deposited.
List of Health Savings Account Pros
1. Anyone can contribute to it.
Other people are allowed to contribute to an HSA, not just the person or family who opened it. Employers, relatives, or even crowdfunding ventures can all add funds to this savings account to pay for medical expenses.
2. Contributions can be tax deductible.
Pre-tax contributions are allowed with a health savings account. If post-tax contributions are put into an HSA, then those funds are considered to be tax-deductible. That means the amount in post-tax contributions can be deducted from a person’s gross income, potentially reducing their tax obligations at the end of the year.
3. Withdrawals are tax-free.
If there is a qualifying expense, HSA holders can make a tax-free withdrawal from their account. The earnings that occur on the assets held within the savings account are tax-free as well.
4. The money never disappears.
The money contributed to an HSA will roll over to the next year, unlike other health savings plans that require owners to spend the money or lose it.
List of Health Savings Account Cons
1. It doesn’t change the health insurance.
High-deductible health insurance plans can be financially burdensome, even with the benefits of an HSA providing an assist. There may not be enough cash to meet an obligation.
2. It creates pressure on individuals to save.
People often neglect their personal healthcare because they’re trying to save enough money in their HSA to cove an emergency expense.
3. There may be taxes and penalties applied.
If a non-qualifying expense is paid for with HSA funds, then taxes are owed on the amount of the withdrawal. There is also a 20% penalty applied to those funds as well. The penalty does not go away until owners of the HSA reach the age of 65.
These health savings account pros and cons must also take into account the fees that some institutions charge for this account. Some may waive fees if a minimum balance is maintained. For some, it is a good way to save for medical care. For others, it may cause more financial harm than good. That is why these key points must be carefully considered.