How to Use HSA Funds
Health Savings Accounts (HSAs) are medical savings accounts available to taxpayers enrolled in a High Deductible Health Plan (HDHP). The funds contributed to these accounts can be used to pay for a wide variety of qualifying expenses, including deductibles, co-insurance, prescriptions and more. Many choose to treat their HSAs as retirement funds, since there is no cutoff for withdrawal. Saving money in an HSA can prepare you and your family for future health care costs, so find out if this option makes sense for your situation.
Investment Options for HSA funds
Savings Account and CD’s: These are insured by the Federal Deposit Insurance Corporation (FDIC), meaning there is essentially no risk. Banks typically pay a small interest rate on the account balance.
Mutual Funds: These require a minimum balance to open and a thorough risk tolerance evaluation. While taking on more risk brings the potential for more reward, it can alternatively bring more losses.
Stocks, Bonds, and Exchange Traded Funds (ETFs): These also require a minimum balance to open, but more risk often pays off in more reward. Like mutual funds, there is potential to lose your investments if your selection performs poorly, but it is important to diversify your portfolio which can help mitigate risk.
Cryptocurrency: Many people are not aware that they are able to invest HSA account funds into cryptocurrency. Converting HSA funds into cryptocurrency involves a few more steps, which will allow you to invest in cryptocurrency such as Bitcoin, Ethereum, and more, and can be deducted tax-free as long as it is used for health related expenses.
Who is Eligible
Those who have a qualified HDHP should be eligible for an HSA as well. In addition, you:
- Must have a valid Social Security Number
- Must have primary residence in the U.S.
- Must claim as an independent
- Cannot have coverage through other health benefits (Medicare Part A or B, TriCare, Veterans Administration)
CARES Act Expands Eligible Expenses
- Feminine hygiene products
- Over-the-counter (OTC) medications without a prescription
- Telehealth services
Advantages of HSA Funds
An HSA Fund gives individuals a unique opportunity to pay for qualifying medical expenses. Individuals can make contributions to their HSA using pre-tax dollars, which can significantly reduce their taxable income. No minimum balance is required, increasing the potential for additional savings through investing. Additionally, funds can be withdrawn after age 65 without any penalty.
For an extensive list of eligible and ineligible expenses, visit the HSA website, or contact us to speak with one of our expert Benchmark Planning team members.