The Benefits and Limitations of Opening a Health Savings Account (HSA)

Financial planning expert, Matt Mellusi shares his insights on the benefits and limitations of Health Savings Accounts (HSA).
TRANSCRIPT:
Hi, I’m Matt with Cary Stamp & Co, and I'm here today to talk about a tax advantaged savings plan that you're probably not tapping into. It's known as an HSA or a health savings account. Now, how do you know if you have access to a health savings account but aren't utilizing it? The main thing is that you have to be enrolled in a high deductible health plan either through your employer or your spouse's employer.
Now, what makes a medical plan a high deductible health plan? There has to be an individual deductible of 1500 dollars a year or a family deductible of $3,000 a year in order to qualify as a high deductible health plan. Now, why might you want to use a health savings account? There are three big tax advantages. The first is that the contributions you make to a health savings account are tax deductible.
The second is that the money you contribute can be invested in growth. Tax free. Then when you're ready to use that money for qualified health expenses, you can take tax free withdrawals from the account. This plan is great, but you can't just contribute as much money as you want to. There are contribution limits, and for 2023, individual can contribute a maximum of $3,850.
A family can contribute a maximum of $7,750. And if you're 55 years or older, you can use what's called the catch up provision and contribute an additional $1,000. Like I said, a lot of people aren't tapping into this tax advantage plan to have access to. Studies show that 88% of people who have a health savings account aren't utilizing it.
If you're unsure whether this would be a good tool for you to use, make sure you consult your financial professional today. I’m Matt with Cary Stamp & Co, and this has been a principled wealth moment.