Mary Beth Franklin: Why HSAs are the Roth IRAs of health care

Aug 2, 2013 @ 12:00 am

Runtime: 1:24

Mary Beth Franklin discusses the benefits of Health Savings Accounts for investors, particularly their tax-saving potential.

Video Transcript

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.

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