Obamacare Aftermath: The One Savings Tool You Need to Know About
Americans are facing a deadly combination of financial obstacles that do not appear to be easing anytime soon. Many people are significantly unprepared for retirement, while healthcare costs continue to rise and pressure household budgets. The Affordable Care Act has been touted as a way to relieve some of this financial stress, but it may also help people realize the benefits of health savings accounts.
Although they were created a decade ago by the Treasury Department, health savings accounts (HSAs) might be the most overlooked aspect of healthcare and financial planning. HSAs are tax-advantaged savings accounts specifically used to pay for qualified healthcare expenses. They are essentially available to everyone who has a qualified high-deductible health plan but no other main health plan, is not enrolled in Medicare, and cannot be claimed as a dependent on someone else’s tax return.
There are several notable benefits with HSAs. Individuals can claim a tax deduction on contributions made by him or her or someone other than employers, even if deductions are not itemized on Form 1040. Similar to some retirement accounts, interest or other earnings within HSAs grow tax-free. Your employer may contribute to the account, but HSAs belong to individuals, so they stay with you if you change employers or leave the workforce, and any remaining balance can be carried over to the following year. You can even invest your HSA funds in stocks and bonds if you wish to do so. If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse’s HSA after your death.