Tis the season to select your health insurance plan either through your employer’s offering or the private insurance market. If you’re considering a high-deductible health plan (HDHP), keep in mind that many (but not all!) come with the fantastic opportunity called a Health Savings Account (HSA).

We love HSAs because they do two things:

1. They help you pay for your medical costs either today or in the future
2. They are triple tax advantaged

The government makes these accounts triple tax-advantaged because they want to incentivize you to save for your future medical costs. We know as the nation greys and gets older, we need to have a pot of money set aside to cover our potential out-of-pocket costs.

Here’s the triple tax saving advantage:

1. When you have an HSA account attached to a high-deductible plan, you get to take a tax deduction on your current your contribution.  For families, it’s $7,000 in 2019 ($7,100 in 2020). This means you get to lower your adjusted gross income by $7,000, a tax savings of potentially around $2,000 if you take into account state and federal income taxes. That’s $170 of savings each month if you do a little rounding. That’s pretty incredible.  That’s step 1 – you get a tax deduction in current year.  If you’re age 55 or older, you eligible for a $1,000 “catch-up contribution” so your can lower your AGI by $7,900 (thus lowering your tax bill by ~$2,300 or $190 a month).
2. Layer two of the triple tax advantage is it grows completely tax deferred meaning it is growing without taxation on any appreciation, any dividends, or any income that’s going on a long as that money is sitting in the HSA account.
3. Here’s the third layer and really the knockout that makes it an awesome savings tool for the future.  If you use the money in the future for medical expenses, your HSA distributions are completely tax free.
   (Here’s another cool thing.  Once you reach retirement, you don’t have to use your HSA for medical expenses, but if you want them to be tax free, it needs to be medical expenses.)

Be careful when you select a high-deductible health plan (HDHP) to make sure it qualifies for HSA eligibility:

1. HDHP minimum deductibles: self-only $1,350 in 2019 ($1,400  in 2020); family: $2,700 in 2019 ($2,800 in 2020)
2. HDHP maximum out-of-pocket amounts: self only $6,650 in 2019 ($6,900 in 2020); family $13,500 in 2019 ($13,800 in 2020)

HSAs can be one of your best friends for the future.

Tis the season to select your health insurance plan either through your employer’s offering or the private insurance market. If you’re considering a high-deductible health plan (HDHP), keep in mind that many (but not all!) come with the fantastic opportunity called a Health Savings Account (HSA).

We love HSAs because they do two things:

1. They help you pay for your medical costs either today or in the future
2. They are triple tax advantaged

The government makes these accounts triple tax-advantaged because they want to incentivize you to save for your future medical costs. We know as the nation greys and gets older, we need to have a pot of money set aside to cover our potential out-of-pocket costs.

Here’s the triple tax saving advantage:

1. When you have an HSA account attached to a high-deductible plan, you get to take a tax deduction on your current your contribution.  For families, it’s $6,900 in 2018 ($7,000 in 2019). This means you get to lower your adjusted gross income by $6,900, a tax savings of potentially around $2,000 if you take into account state and federal income taxes. That’s $170 of savings each month if you do a little rounding. That’s pretty incredible.  That’s step 1 – you get a tax deduction in current year.  If you’re age 55 or older, you eligible for a $1,000 “catch-up contribution” so your can lower your AGI by $7,900 (thus lowering your tax bill by ~$2,300 or $190 a month).
2. Layer two of the triple tax advantage is it grows completely tax deferred meaning it is growing without taxation on any appreciation, any dividends, or any income that’s going on a long as that money is sitting in the HSA account.
3. Here’s the third layer and really the knockout that makes it an awesome savings tool for the future.  If you use the money in the future for medical expenses, your HSA distributions are completely tax free.
   (Here’s another cool thing.  Once you reach retirement, you don’t have to use your HSA for medical expenses, but if you want them to be tax free, it needs to be medical expenses.)

Be careful when you select a high-deductible health plan (HDHP) to make sure it qualifies for HSA eligibility:

1. HDHP minimum deductibles: self-only $1,350; family: $2,700
2. HDHP maximum out-of-pocket amounts: self only $6,650; family $13,300

HSAs can be one of your best friends for the future.

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities and medical conditions.  The different parts of Medicare help cover specific services:

• Medicare Part A (Hospital Insurance)
  • Inpatient care in hospitals
  • Skilled nursing facility care
  • Hospice care
  • Home healthcare
• Medicare Part B (Medical Insurance)
  • Services from doctors and other health care providers
  • Outpatient care
  • Home health care
  • Durable medical equipment
  • Many preventative services
• Medicare Part C (Medicare Advantage)
  • Includes all benefits and services covered under Part A and Part B
  • Usually includes Medicare prescription drug coverage (Part D) as part
    of the plan
  • Run by Medicare-approved private insurance companies that follow
    rules set by Medicare
  • Plans have a yearly limit on your out-of-pocket costs for medical
    services
  • May include extra benefits and services that aren’t covered by Original
    Medicare, sometimes for an extra cost
• Medicare Part D (Prescription Drug Coverage)
  • Helps cover the cost of prescription drugs
  • Run by Medicare-approved drug plans that follow rules set by Medicare
  • May help lower your prescription drug costs and help protect against
    higher costs in the future

We’ll cover the when’s and how’s of enrolling in forthcoming articles.

Source: medicare.gov