![]() The truth: HSA holders can have a limited-purpose FSA to pay for qualified expenses associated with dental and vision care. You can still have an FSA to address certain immediate qualified medical expenses Some people have one for investing, and another for cash to pay medical expenses. It's also possible to have multiple HSAs. You can even open an HSA if you're in an HSA-eligible health plan and your employer does not provide one-or if they do but you prefer a third-party option. So when you leave a job, you keep all of the money you've saved up in your HSA and can transfer into a new HSA or employer-sponsored HSA at your next job. Unlike health care FSAs, which your employer technically owns, your HSA belongs to you. Your HSA is your account, not your employer's Over 30 years of contributing and investing the maximum family contribution, you could end up with almost $1 million, assuming a 7% rate of return. Combined with the ability to invest funds, this allows your health savings to benefit from compounding returns. This means you don't forfeit any money you don't use in a given year, and you can carry it forward until you reach a time that you want or need to use the money in your HSA. HSAs are not subject to "use-it-or-lose-it" rules ![]() According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2022 may need approximately $315,000 saved (after-tax) to cover health care expenses in retirement. You won't get to deduct from your taxes what your employer contributes, but you will be getting free money that can grow over time if it's invested.īy investing at least a portion of your HSA funds, you can potentially build up your medical spending nest egg, which can be especially valuable later in life. 1 Think of it like a 401(k) match for your health. Your employer may make contributions to your HSAĪlmost 80% of employers help employees pay for medical expenses through contributions to their HSAs. Only contributions made with payroll deduction avoid Medicare and Social Security taxes. But it's important to keep in mind, contributing via payroll deductions will lead to the most tax savings. That helps increase the amount of money you have for medical spending. HSA tax deductions can have powerful benefits: For instance, someone in the 22% federal income tax bracket could potentially save nearly 30% in taxes (federal income + FICA + potentially state income) on every dollar contributed to the HSA. If you fund your HSA with after-tax dollars instead, you may be able to take a tax deduction on your personal taxes when you file. HSA contributions are typically made with pre-tax income from your paychecks, similar to the way 401(k) contributions are set up. ![]() You can deduct your contributions from your taxes Here's more about what you need to know about the financial advantages of HSAs.
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