Mary Beth Franklin discusses the benefits of Health Savings Accounts for investors, particularly their tax-saving potential.
Advisers can explain to their clients that a health savings
account is like a Roth IRA for your health care.
It's a great tax vehicle where the money you can
contribute to an HSA is tax deductible. The money grows
tax deferred and when the money's taken out and spent
on health care, it's tax free. So with the triple
tax break, a win, win, win situation. To have that
health savings account you must have a high deductible health
care plan to pair it with. Now, a lot of
employers are moving towards high deductible plans which they- you've
mystically like to call consumer driven health care plans. Consumers
may not like the fact that they have to pay
a whole lot more out of pocket before the insurance
kicks in. But the silver lining is they can make
some really smart financial decisions by having an HSA. And
unlike the more familiar flexible spending account or SSA that
most employees are familiar with, that has it a use
it or lose it provision that if you don't use
the money, that you've deferred during the year, you lose
it. An HSA doesn't work like that. Year after year
that money rolls over. And for people who build up
some big balances, it can become another source of tax
free income in retirement.