HOW HEALTH SAVINGS ACCOUNT MONEY CAN BE USED

May Health Savings Account money be used on medical expenses that do not count as covered expenses under the insurance policy?
Yes. This is another of the great advantages of the Health Savings Account. The typical American is out-of-pocket a considerable amount every year for medical expenses that are not covered under the insurance plan, due to the fact that the plan may not cover dental, or because of deductibles and copayments. The individual is presently paying those amounts with after-tax dollars. If you have a daughter that needs braces for her teeth at a cost of $4,000, it typically means you need to have $6,000 in pre-tax income. With a Health Savings Account, you are going to cut out all of the extra cost by paying for dental work, eyeglasses, and other expenses not covered by the deductible with tax-free money from your Health Savings Account.

Can HSA money be used for non-medical expenses?
Yes, but money withdrawn before age 65 for non-medical purposes is subject to income taxes and a 10% federal excise tax.

What happens to the money in my HSA that I don't spend?
At the end of the year, the money not spent will simply continue to earn interest. Medical Savings Insurance pays 5% interest on any balance in the account. The interest is not taxable if you use it for medical expenses.

If I accumulate a bunch of money (way over the deductible) in my HSA, when I reach retirement age can I use the funds for living expenses?
Yes. At age 65 the HSA functions like a traditional IRA. You can withdraw money without penalty, paying only normal income taxes. And after retirement you can still withdraw the accumulated HSA savings tax-free to pay out-of-pocket medical expenses-like nursing home care and other expenses not covered by Medicare.

High Deductible Insurance

Key Details of the Health Savings Account Law