What Does HSA Mean? Unpacking the Basics of a Health Savings Account

Have you ever come across the term HSA and wondered what it means? An HSA stands for Health Savings Account, and it is a powerful tool that can help you save money for medical expenses while also reducing your taxable income. But what exactly is an HSA and how does it work?

At its core, an HSA is a savings account that allows you to set aside pre-tax money to pay for qualified medical expenses. Here's how it typically works:

• You contribute a certain amount of money to your HSA account each year, up to the annual limit set by the IRS.
• The contributions you make are tax-deductible, meaning they reduce your taxable income for the year.
• You can use the funds in your HSA to pay for a wide range of medical expenses, including doctor's visits, prescriptions, and even some over-the-counter medications.
• Any unused funds in your HSA roll over from year to year, so you never have to worry about losing the money you've saved.
• Once you reach age 65, you can withdraw money from your HSA for any purpose without penalty, although you will have to pay income tax on the withdrawals if they are not used for qualified medical expenses.

Health Savings Accounts offer several benefits, including:

• Lowering your taxable income
• Providing a way to save for medical expenses tax-free
• Allowing you to take your HSA funds with you if you change jobs or retire

Overall, an HSA can be a valuable financial tool that helps you plan for both current and future healthcare needs. If you're eligible for an HSA through your employer or on an individual basis, it's worth considering as part of your financial strategy.

Health Savings Accounts, commonly known as HSAs, are an essential resource for anyone looking to proactively manage their healthcare finances. By opening an HSA, you can put aside money that is specifically designated for medical expenses, ensuring you are prepared for whatever comes your way.