Here are eight tips for getting the most out of your Health Savings Account:
1. Extracting the money from your HSA is as simple as using a checking account. You can receive blank checks, a debit card or both. The debit card may be used for online purchases.
2. You can use an HSA to pay for medications only if you have a prescription for them, including those sold over the counter. The exception is insulin; it doesn’t require a prescription. This rule was part of the Affordable Care Act, also known as Obamacare.
3. Nontraditional medical services, like acupuncture and massages, can qualify as legitimate HSA expenses. They’ll need to be permitted by your high-deductible health plan and you must have a prescription from your doctor, Grossmiller says.
4. Avoid the steep penalty for using your HSA for non-medical expenses before 65. “If you pull the money out before then for anything other than reimbursable expenses, there’s a 20% tax on the amount of the withdrawal,” Huber says.
5. If the IRS audits you about your HSA before age 65, you’ll need to prove the account was used for qualified expenses. To protect yourself, keep receipts for all out-of-pocket health costs and be sure the bills you pay with an HSA meet the IRS test for qualified medical expenses, Grossmiller says.
The complete rules about qualified medical expenses are in IRS Publication 969, but keep in mind that you can’t pay for health insurance premiums or cosmetic surgery out of an HSA.
6. Once you turn 65, you can no longer contribute to an HSA. But you can make penalty-free withdrawals.
7. An HSA is especially worth considering if you’re already maxing out your 401(k)-type plan and IRA.“It’s another avenue to fund a retirement account,” Grossmiller says.
8. Be careful about how you’ll invest your HSA. Employees are typically given an assortment of investment options, much like 401(k)s.
You probably should avoid putting all the money into stocks or equity mutual funds, due to the volatility of the market. “Since the purpose of an HSA is to pay for medical expenses, it is important to balance risk, especially in newer accounts that will have lower balances,” Grossmiller says. The last thing you’ll want is a medical emergency and no money to pay for it.
Click here to read the full article.