This Triple Scores You a Homerun

Despite the snow on the ground and freezing temperatures outside, we are at least beginning to see the daylight lasting a little longer, the first sign that we “are on the other side” of winter.

Another sure sign of spring approaching for us hearty New Englanders is when the Red Sox report to Florida for spring training, and that time has arrived!

With baseball in mind, this month I introduce an underutilized and often misunderstood savings vehicle being offered by more and more employers.

Read on to learn how using a health savings account (HSA) can offers a TRIPLE TAX SAVINGS, ultimately scoring you a HOMERUN.

The Basics of an HSA

An HSA is a savings account for health care expenses tied to what’s known as a High Deductible Health Plan, offered as a health care option through your employer.

This type of account is different from a Flexible Spending Account (FSA), where you can lose any unused portion of your dollars set aside for a given year.

The money set aside in an HSA stays with you forever.

Even if you leave your current employer, your HSA dollars go with you. And as an added bonus, you are also allowed to invest your contributions. You don’t have to use them in that year.

How the high deductible health plan works and whether it is right for your circumstances is a newsletter for another time, but many who currently have this type of plan with an HSA don’t understand the benefits of the HSA in and of itself.

Triple Tax Advantaged

Your contributions are pre-tax, so they lower your taxable income in the year they are made. Think of this tax savings in the same way you think of your pre-tax 401(k) contributions.

You can invest your contributions and they will grow tax free forever, meaning any growth of your contributions is also NOT taxed. This account is like a Roth IRA in this regard, so for high income earners who are phased out of making direct Roth contributions, this is an excellent tax savings vehicle that offers the same tax free growth one gets from a Roth.

Withdrawals, AS LONG AS USED FOR QUALIFED MEDICAL EXPENSES, are 100% tax free.

Boom!!! A Triple Tax Homerun!

With ever increasing health care costs in this country, this is a great tool for your future self to have a bucket of tax free money to help cover your future medical care costs, and a great tool in the current year to reduce your taxable income.