A Health Savings Account (HSA) is a tax-advantaged savings account that can be used to pay for qualified medical expenses. It can be a great way to save for future medical expenses and take advantage of tax breaks.
Benefits of an HSA
An HSA has many advantages. One of the major benefits is the tax savings. Contributions to an HSA are made pre-tax, and any withdrawals used for qualified medical expenses are tax-free. Additionally, the money can be invested, allowing for potential growth over time.
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Eligibility Requirements
In order to be eligible for an HSA, you must have a high-deductible health plan (HDHP). An HDHP is a health insurance plan with a higher annual deductible than a traditional plan. The annual deductible for an HDHP must be at least $1,400 for an individual or $2,800 for a family in 2020.
Contribution Limits
The annual contribution limit for an HSA is $3,550 for an individual or $7,100 for a family in 2020. If you are 55 or older, you can make an additional catch-up contribution of $1,000.
Investment Options
Many HSA providers offer the option to invest the funds in your account. This can be a great way to potentially earn more money on your contributions. It is important to keep in mind that investing involves risk, and you could lose money.