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HSA for the win

Healthcare costs are more expensive in 2019. You might be asking yourself, “How do I make this more beneficial for me?”, and that’s a reasonable question. An HSA is beneficial, there’s no doubt about that. The next question is how it fits into your financial plan.

You can expect the cost of medical and drug benefits to rise by about 5% in 2019, according to the annual health care survey. This would be the sixth year with a 5% increase, with premiums and out-of-pocket costs for employees and their dependents with an average of $14,800 this year. Fortunately, your employer continues to cover 70% of the tab, on average, while you pick up the rest.

The reason for this increase comes from high-cost claimants, specialty pharmacy drugs and the treatment of specific diseases or conditions.

Most employers will continue to offer high-deductible plans with a HSA in 2019, even though these type of plans are down 8% from 2018 to 2019. The average deductible for a high-deductible plan in 2018 was $1,600 for employee-only coverage and $3,200 for family coverage. Employers plan to continue to encourage enrollment in high-deductible plans by contributing to workers’ HSA accounts. To be able to qualify for a tax-friendly HSA account in 2019, your plan must have a deductible of at least $1,350 for single coverage or $2,700 for family coverage.

Although, the typical employer HSA contribution next year will be $500 for those of you with single coverage and $1,250 for you with family coverage, you can contribute $3,500 to your HSA if you have single coverage and $7,000 if you have family coverage. And if you’re 55 or older, you can contribute an extra $1,000.

This matters even if you don’t have many medical expenses now, because in the long term you’ll be able to benefit more from the tax advantages of an HSA, while building up a tax-free stash of money to help pay for medical expenses in the future – especially after retirement!

Unlike FSA’s (flexible-spending accounts), you don’t have to use all your money by the end of the year. So that means you’ll get an extended benefit from an HSA if you let the money grow for the long term.

An HSA also offers a triple tax break:

(1) your contributions are tax-deductible,

(2) your HSA money grows tax-deferred, and

(3) withdrawals used to pay for medical expenses are tax-free.

When you place your money in your HSA account, you’re not limited to placing the money into a money market or other account. Most people keep enough money to cover the current year’s deductible in a money market account, unless they have other cash for that. After that, most people then invest the remaining funds in mutual funds to grow over the long term. Many banks, brokerage firms, and other HSA administrators offer a choice of mutual funds.

Before maxing out your contributions, you want to make sure that you meet with Rukosky and Associates for a FREE appointment to evaluate your financial situation properly and effectively by clicking here.

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