Smart Money | HSA | Ohio CPA Firm
Think of your HSA as a type of deductible Roth IRA, one that that lets you use the funds you invest into the account exclusively for medical expenses. One way to take full advantage of this option is to contribute more than you will use on your healthcare expenses during the year. What’s left will continue to grow upon itself – just like a defined contribution retirement plan.

When it comes to talking to others about the benefits of retirement savings, we take our job very, very seriously. The same is true concerning savings tactics that can help take the financial strain off your employee’s planned retirement budget. Providing your employees with the option of participating in a Health Savings Account (HSA) can be a great way to help them manage their short- and long-term wealth strategies. But they may need to be educated when it comes to realizing the real value of this option.

Read Also: Evaluation of HSAs Requires A Team Approach

Help Them Forget What They Think They Know

Some employees mistakenly believe that HSAs operate like flexible-spending accounts (FSAs), meaning that they think they are at risk of losing the funds they have invested in the plan at the end of the year if they fail to use them. But that’s not the case with an HSA. Instead, think of the HSA as a type of deductible Roth IRA, one that that lets them use the funds they invest into the account exclusively for medical expenses. One way to take full advantage of this option is to contribute more than they will use on healthcare expenses during the year. What’s left will continue to grow upon itself – just like a defined contribution retirement plan. You can tap into those funds later.

Are you looking for more ways to get your employees excited about investing in an HSA? Take a look at some of the other great benefits of participating in an HSA.

  1. Triple Tax Benefits – When it comes to your HSA, the government is pretty good about keeping its metaphorical hands off your money. This is because the contributions you make each pay period are contributed before tax (payroll tax, and federal, state and local income tax), your earnings will continue to grow – tax free – as long as you use the funds exclusively for medical expenses, and any distributions made from the account to pay for medical expenses are given to you tax free. Basically, when you invest in an HSA, you can rest assured knowing that all the money you put in is yours to get back out – and then some …
  2. Take It Or Leave It – Your HSA is yours – it belongs to you and not the government or the employer. That means that, in addition to having the ability to let your money sit and accumulate interest for as long as you like, you can take it with you wherever you go. Change employers, change health insurance coverage, change whatever you like – the money stays with you.
  3. An Extra Perk For The Older Population – Once you start receiving Medicare coverage around age 65, your premiums will be added to the eligible expense list for HSAs, which is a great way to take care of these expenses without messing with your monthly budget. In addition, beginning at 65, you no longer have to pay the 20 percent distribution penalty when you use your HSA funds for non-medical distributions. Instead, non-medical expenses will receive normal tax treatment.
  4. It’s OK To Let It Sit – Fortunately, when you have an HSA, you are not required to withdraw from your account annually. In fact, if you like, you can let it sit for as long as you like.
  5. No Test Zone – Some seniors worry about whether they make too much money, which could influence the Social Security payments they receive. If you’ve had your HSA for a long time, you may be worried about how this large amount of cash will be viewed by Uncle Sam. Take a breath – your HSA balance will not impact your Social Security benefits. HSAs are not taken into account for Social Security means testing.

HSAs are great tools that can be used to increase your wealth and protect it. Do you want to know more about this option? Email Rea & Associates to ask additional questions or to request to speak with one of the firm’s retirement plan experts.

By Paul McEwan, CPA, MTax, AIFA (New Philadelphia office)

Check out these articles for even more insight into how HSAs can help take the financial burden off you now and during retirement:

Using Health Savings Plans To Plan For Retirement

Tax Time Tips: Financial Considerations For Filing Season

The Cost Of Reimbursing Employees For Health Care

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