When it comes to your financial wellness, building a strong foundation means preparing for both the expected and the unexpected– especially healthcare expenses.

A Health Savings Account (HSA) can be a valuable part of that foundation, offering tax advantages, flexibility, and the ability to save for healthcare costs today and in the future. Whether you’re using your HSA to cover current medical expenses or allowing your balance to grow over time, an HSA can help you take greater control of your healthcare spending while supporting your overall financial goals.

Here are some frequently asked questions to help you understand how an HSA works and how it can fit into your financial fitness plan.

1. What is a Health Savings Account (HSA)?
   A Health Savings Account, or HSA, is a tax-advantaged savings account designed to help you pay for qualified medical expenses. You can contribute money to your HSA, potentially receive tax benefits, and use the funds for eligible healthcare expenses such as deductibles, copays, prescriptions, dental care, and vision care.
2. Who is eligible to contribute to an HSA?
   Generally, you must be enrolled in a qualifying high-deductible health plan (HDHP) to contribute to an HSA. There are additional IRS eligibility requirements, so it’s important to review your specific health plan and circumstances before opening or contributing to an HSA.
3. How does an HSA differ from a Flexible Spending Account (FSA)?
   While both accounts can help you pay for qualified healthcare expenses with tax advantages, there are important differences. In general, HSA funds belong to you, can roll over from year to year, and remain yours even if you change employers or health plans. FSAs are typically employer-sponsored and may have different rules regarding annual rollover and account ownership.
4. What can I use my HSA money for?
   HSA funds can generally be used for qualified medical expenses, including deductibles, copays, coinsurance, prescription medications, dental expenses and vision care. The IRS determines which expenses qualify, so it’s a good idea to keep receipts and documentation for your records.
5. Do HSA funds expire at the end of the year?
   No. Unlike some other healthcare spending accounts, HSA funds generally roll over from year to year. You don’t have to spend the money by December 31, which allows your balance to grow over time and can help you prepare for future healthcare expenses.
6. Can I take my HSA with me if I change jobs?
   Yes. An HSA is individually owned, so the account generally stays with you even if you change employers, retire or change health plans. You can continue using the funds for qualified medical expenses, although you may not be eligible to make new contributions if you no longer meet the HSA eligibility requirements.
7. Are HSA contributions tax-deductible?
   HSA contributions may offer significant tax advantages. Contributions made by or on behalf of an eligible individual are generally excluded from federal taxable income, and qualified withdrawals are generally tax-free. Tax treatment can vary based on your circumstances and state law, so consider consulting a qualified tax professional for advice about your situation.
8. What happens if I use my HSA for something other than a qualified medical expense?
   If you’re under age 65 and use HSA funds for a non-qualified expense, the withdrawal is generally subject to income tax and an additional 20% tax penalty. After age 65, the 20% additional tax generally no longer applies, although non-qualified withdrawals are still generally subject to income tax.
9. Can I invest the money in my HSA?
   Depending on the HSA provider and account features, you may be able to invest a portion of your HSA balance. This can give an HSA an additional role as a long-term savings tool for healthcare costs, particularly if you can afford to pay current medical expenses from other funds. Investment options and requirements vary by provider.
10. Why should I consider an HSA as part of my overall financial plan?
    An HSA can do more than help cover today’s healthcare expenses. Because contributions can receive tax advantages, unused funds generally roll over, and the account stays with you, an HSA can also be part of a long-term strategy for managing healthcare costs. For eligible individuals, it can be a useful complement to emergency savings, retirement savings and other financial goals.

An HSA can be more than a healthcare spending account; it can be another tool for building financial security. Visit https://www.trianglecu.org/bank/savings/ to learn more and schedule an appointment to open your HSA today!