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Health Savings Account - New Direction IRA
A Health Savings Account (HSA) is a tax advantaged savings account for current and/or future medical expenses.
An HSA is an Individual Custodial Account, and unlike a flex spending account, it is not "use it or lose it."
Contributions are made in cash and are "pre-tax," account earnings are tax-deferred, and distributions for Qualified Medical Expenses (QME) are tax-free.
HSAs can invest in assets (stocks, real estate, gold, etc.) on a tax-deferred basis.
To open an HSA and make contributions, you must have a high-deductible health plan, not be claimed as a dependent, and not be enrolled in Medicare.
Tax-free distributions to reimburse QMEs can be made at the time of service or anytime thereafter; as long as the QME occured after the HSA is open.
- A High Deductible Health Plan (HDHP) is health insurance that has lower premiums but a higher deductible.
- An HDHP pays for catastrophic medical expenses and qualifies consumers to set aside tax-free funds in an HSA.
- HDHPs are an alternative to the plans offered by HMOs and PPOs that feature low deductibles but charge high premiums.
- In 2015 and 2016 HDHPs must have a deductible of at least $1,300 for self coverage and $2,600 for family coverage.
- 2015 Maximums for deductible and out-of-pocket expenses are $6,450 ($6,550 for 2016) for self coverage and $12,900 ($13,100 for 2016) for family.
- Out-of-pocket expenses for HDHPs include money paid to satisfy the deductible, co-payments, and other expenses.
- These are all costs that the HSA may be used to cover.
- An HDHP may provide preventive care benefits without a deductible or with a deductible below the minimum annual deductible.
- Preventive care includes periodic health evaluations, immunizations, and more.
HSAs can invest in a wide variety of assets including real estate, precious metals, public and private stock, notes, and more. Contributions to HSAs do not count toward your annual IRA contribution limit. Once the account holder has reached age 65, HSA funds can be
distributed for non-QMEs. These distributions are subject to tax, but incur no penalty. There are no Required Minimum Distributions (RMD) like is required for Traditional IRAs.
Start with the basics and explore this retirement account introduction. Learn how retirement plans can participate in a variety of investments, including real estate, precious metals, and more. This presentation is geared toward beginners and those who are just getting started with retirement plans.
- You need a qualified HSA trustee for this account (New Direction IRA is an authorized provider of HSAs). The HSA can be established through a custodian that is different from your health plan provider.
- In order to self-direct your HSA funds, you need a self-directed HSA provider like New Direction IRA.
- An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally cannot make contributions to an HSA.
- You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. See exceptions below.
- You are not enrolled in Medicare.
- You cannot be claimed as a dependent on someone else's tax return.
- An HSA is "portable" so it stays with you if you change employers or leave the work force.
- You can roll over amounts from Archer MSAs and other HSAs into an HSA.
You can have additional insurance that provides benefits only for the following items.
- Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property
- A specific disease or illness
- A fixed amount per day (or other period) of hospitalization
You can also have coverage (whether provided through insurance or otherwise) for the following items.
- Dental Care
- Vision Care
- Long-term Care
Reduce your health care costs with a Health Savings Account. While most HSAs provide only savings or money market accounts, limiting what your HSA can earn, a self directed HSA can earn more by investing in precious metals, real estate, mortgages, limited partnerships, mutual funds and more.
Learn more about HSA Contribution and HSA Distribution.
For more detailed information, feel free to contact us or visit IRS.gov.
Category: Savings account