My Health Is Great. Should I Still Open An HSA?

© Getty Images A woman with a tattoo on her leg looks at her medical bills.

Healthcare can be a big expense at any age, so it's important to save money for medical bills. But you don't have to limit yourself to just a savings account. In fact, if you have a high-deductible health insurance plan compatible with a Health Savings Account or HSA, it's worth signing up.

Money from your Social Security account can be used to pay for a variety of health care expenses for your children, from medical bills to eyeglasses and orthodontics. But if you and your family's health is excellent, you may think you don't have to worry about an SAH.

After all, why save money for healthcare if you don't think there will be plenty of it in the near future? But with the flexibility that HSAs offer, it's worth opening and supporting one if you don't plan on spending money on health care anytime soon.

You can use the HSA later.

If you are familiar with Flexible Spending Accounts (FSA), you may know that these plans can cause you to reduce your balance from year to year or lose money. HSAs work in different ways.

With an HSA, you can move your money around indefinitely, but you don't have to use it right away. This means that you can contribute to your HSA this year and the money will not be lost even if you do not incur any medical expenses. You will have the ability to move forward - even in retirement. At this stage of life, when your health care costs are likely to increase, having more medical savings can be very beneficial.

Are you eligible for an HSA?

One of the disadvantages of an HSA is that it is not open to everyone. To participate in an HSA, you must be enrolled in a high-deductible health insurance plan, which can change from year to year.

In 2023, your plan will be considered HSA-eligible if you have an individual deductible of $1,500 or more or a family deductible of $3,000 or more. Your plan maximum cannot exceed $7,500 if you have single coverage or $15,000 for family coverage.

But if your plan allows you to contribute to an HSA, it's worth it. These contributions, like FSA contributions, are tax deductible. Then, when you put your money in an HSA, the earnings in your account are tax-exempt, just like earnings from a Roth IRA. HSA withdrawals are always tax-free as long as the funds are used for healthcare expenses.

You may not need the money in your HSA anytime soon. But it is very unlikely. And this time, you are ready to be very grateful.

Also, even if your health (and that of your family) is excellent right now, accidents can happen at any time. You never know when you might hurt yourself and end up in the ER with a $1,500 bill. So even if you don't think you'll need HSA money anytime soon, you might be pleasantly surprised to find yourself in the account sooner than you think.

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