A Health Savings Account (HSA) may be a beneficial move for Americans to consider for future medical expenses. Business Insider's Senior Personal Finance Reporter and Spokesperson Jennifer Streaks joins Yahoo Finance's Wealth! to discuss the benefits of an HSA plan.
Streaks explains that the HSA is offered through an employer, and individuals can sign up for it similar to a 401(k). She suggests thinking of the HSA as "a bank account for your health," noting that it is intended for medical expenses not covered by insurance plans.
She recommends investing in an HSA "as soon as you can." The tax benefits include reducing taxable income, tax-free growth within the account, and tax-free withdrawals, providing "a triple tax benefit."
For more expert insight and the latest market action, click here to watch this full episode of Wealth!
Editor's note: This article was written by Angel Smith
Video Transcript
BRAD SMITH: There's an employer-sponsored account that can help you build wealth that you may qualify for but probably aren't taking advantage of. No, I don't mean your 401(k), I mean an HSA-- a health savings account. You could be building stacks of tax advantaged cash right now. Money that you can grow with the markets to help pay for medical expenses down the line.
And here to tell you all about it, we've got Jennifer Streaks-- Business Insider Senior Personal Finance Reporter and Spokesperson. Jennifer, great to see you here. So a lot of people are missing out on this right now. How can they make sure that they're getting into the right and taking advantage of this HSA?
JENNIFER STREAKS: Well, thanks for having me. But yeah. The HSA is a common health plan that most people do not know about. It's through your employer. You just sign up with it the same way you would with your 401(k) and you start immediately taking advantage of the tax benefits.
BRAD SMITH: OK. And so what can you use those HSA dollars for typically?
JENNIFER STREAKS: You should think about it as a bank account for your health, for your medical expenses. It's for qualified medical expenses. Things that aren't going to be covered by your regular health insurance plan. And there's a long list. You check to see what your plan will cover. And you can reimburse yourself if you have to come out-of-pocket for those expenses.
BRAD SMITH: So when should people start investing in an HSA account and making sure that there are funds that are going in there?
JENNIFER STREAKS: As soon as you can. I have one and I love it. I get to reimburse myself. Or if I don't want to reimburse myself, my contributions actually reduce my taxable income. So it's beneficial to me, even if I'm not actively using it.
BRAD SMITH: And you mentioned the tax benefit there. What are the typical tax benefits of HSA accounts?
JENNIFER STREAKS: They reduce your taxable income. Any of the growth, any of the interest that comes out of that account is also tax-free. And your withdrawals are tax-free, as long as you use them for qualified medical expenses. So it's a triple tax benefit.
BRAD SMITH: And then the eligibility here. I mean, how do people go about assessing their eligibility to contribute to an HSA?
JENNIFER STREAKS: Well, you have to have a high deductible health plan. So you need to check with your employer, see what your deduction is, look at your plan, the health plan, your number 1 plan first. And see what your deductible is and that that'll tell you whether or not you're eligible for HSA.
BRAD SMITH: Just lastly while we have here, I mean, the dollars that people are putting away, it gets cut into a little bit more as the expenses or the costs of certain services go higher within the health care industry as well. How can people adequately assess the amount that they're putting into that spending account?
JENNIFER STREAKS: I think that it depends on what your health needs are going to be over the course of the year. We all know what our well checkups are going to be, what your dental expenses are going to be, and if you need to increase your contributions into that. So you basically make a budget for your health care and you decide based on that, what you're going to need to contribute.
BRAD SMITH: Jennifer Streaks-- Business Insider Senior Personal Finance Reporter and Spokesperson. Jennifer, great to see you. Thanks for taking the time.
JENNIFER STREAKS: Thank you.
