HSA’s Explained – Part 2

Are you familiar with HSAs?

A Health Savings Account is a great way to manage the cost of healthcare. Money contributed to an HSA can remain in cash and money market accounts or invested in mutual funds. If invested, it’s at risk of market volatility. Your age and health will determine whether to stick with cash or money market funds. Contributions and long-term growth are tax-free. So are withdrawals for health expenses. Contributions can roll over from year to year. There’s a 20% penalty on withdrawals for anything other than health care before the age of 65. After that, withdrawals can be used for anything, and there are no required minimum distributions. Spouses named as beneficiaries inherit and treat the HSA like their own. Non-spouse beneficiaries must immediately cash out and pay the required income tax. You can’t be enrolled in Medicare or claimed as a dependent on someone else’s tax return. If you have a flexible spending account known as an FSA, you’re disqualified as well.

An Emergency Savings account is still essential. Set aside a minimum of 3 months’ living expenses before contributing to long-term retirement accounts or an HSA, and if you’re under 65, withdrawing money for an emergency other than healthcare will cost you in penalties. So, anticipate the need for future funds. Research your options and seek wisdom. As the prophet Job said, “With God are wisdom and might; he has counsel and understanding.”

And if medical bills have led to credit card debt, Christian Credit Counselors can help. They can create a debt management plan specifically for you. For more information, visit online at crown.org/ccc.