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on Thursday, November 7, 2024
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Health Savings Accounts
Tax Advantages of a Health Savings Account + Added Benefits Age 55+
A Health Savings Account (HSA) offers several significant tax advantages:
- Tax-deductible Contributions. Contributions to an HSA are tax-deductible, meaning they reduce your taxable income. If your employer makes contributions on your behalf, these are typically made with pre-tax dollars.
- Tax-free Growth. The money in your HSA grows tax-free. Any interest or investment earnings on funds in your account are not subject to taxes.
- Tax-free Withdrawals. Withdrawals from an HSA are tax-free, as long as they are used for qualified medical expenses.
- Rollover Benefits. Unlike Flexible Spending Accounts (FSAs), the funds in your HSA roll over year to year, so you don’t lose any unused money at the end of the year.
- Investment Opportunities. Many HSA plans allow you to invest the funds in your account, potentially increasing your savings over time.
These advantages make HSAs a powerful tool for managing healthcare costs and saving for future medical expenses.
At age 55, you can enjoy several additional advantages with a Health Savings Account:
- Catch-up Contributions. Once you turn age 55, you can contribute an extra $1,000 per year to your HSA, on top of the standard contribution limits. This allows you to save more for future medical expenses.
- Tax-deductible Contributions. Just like before age 55, your contributions are tax-deductible, reducing taxable income.
- Tax-free Growth. The money in your HSA continues to grow tax-free, whether through interest or investments.
- Tax-free Withdrawals. Withdrawals for qualified medical expenses remain tax-free.
- Flexibility After Age 65. After you turn age 65, you can use HSA funds for non-medical expenses without a penalty, though you will pay ordinary income tax on those withdrawals. This makes the HSA similar to a traditional IRA in terms of flexibility.
If you have specific questions about how to maximize these benefits or how to open an HSA, contact First National Bank at 515-232-5561 and ask to speak to an HSA specialist. You can also stop by any of our bank locations in Iowa.