A Health Savings Account, or HSA, is a financial account established by an individual or family to pay for qualified medical expenses tax-free. Health Savings Accounts can be opened by an individual, or offered by an employer alongside a high-deductible health insurance plan.
Health Savings Accounts combine the benefits of both traditional and Roth 401(k)s and IRAs for medical expenses. Taxpayers receive a 100% income tax deduction on annual contributions, they may withdraw HSA funds tax-free to reimburse themselves for qualified medical expenses, and they may defer taking such reimbursements indefinitely without penalties.
HSAs are unique - “IRAs on Steroids” - with triple tax advantages:
Tax-free accumulation of interest and dividends tax-free, and
Tax-free distributions for qualified medical expenses.
As such, Health Savings Accounts are growing in popularity. From 2006 to 2013 over 10 million adults acquired either an HRA or HSA plan. In 2013 over 11.8 million adults had an HRA or HSA, with total assets in these "accounts" over $23.8 billion.
The sections outlined on our navigation bar provide more information about Health Savings Accounts.
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