RISMedia
  • News
  • Premier
  • Reports
  • Events
  • Power Broker
  • Newsmakers
  • More
    • Publications
    • Education
No Result
View All Result
  • Agents
  • Brokers
  • Teams
  • Marketing
  • Coaching
  • Technology
  • More
    • Headliners New
    • Luxury
    • Best Practices
    • Consumer
    • National
    • Our Editors
Join Premier
Sign In
RISMedia
  • News
  • Premier
  • Reports
  • Events
  • Power Broker
  • Newsmakers
  • More
    • Publications
    • Education
No Result
View All Result
RISMedia
No Result
View All Result

Do you Need a Health Savings Account? Here are the Pros and Cons

Home Consumer
Karen Roberts, Bankrate.com
May 2, 2021
Reading Time: 3 mins read
Do you Need a Health Savings Account? Here are the Pros and Cons

(TNS)—A health savings account, or HSA, allows anyone with a qualifying high-deductible health plan to set aside pretax funds to pay for approved medical expenses. Your money is held by a qualified HSA trustee (typically a bank, credit union or similar entity) to be used to pay for, or reimburse yourself for, these approved expenses.

Who typically uses a health savings account?

People with a qualifying high-deductible health plan, or HDHP, are most likely to use a health savings account.

A health insurance plan is considered a HDHP if it has a:

– Minimum deductible of $1,400 for individual coverage and $2,800 for family coverage

– Maximum out-of-pocket cost of $7,000 for individual coverage and $14,000 for family coverage

How do health savings accounts work?

Not all plans may qualify as a HDHP, so check with your employer or insurance agent if you are not sure. Most employers have selected an HSA trustee but even if they have, you can select your own. Different trustees charge different fees, offer varying interest rates and investment options and may offer a variety of services such as receipt storage and the ability to transfer funds between your HSA and checking or savings accounts.

For 2021, the maximum HSA contribution is $3,600 for an individual and $7,200 for family coverage. Employees who reach age 55 by the end of the tax year can contribute an additional $1,000 as a “catch up” provision.

If these contributions are deducted from your paycheck by your employer, and remitted to a trustee, these funds are pre-tax, reducing your annual income by the amount you defer. In other words, you pay a lower amount to Uncle Sam and more money stays in your pocket. Accrued interest on the funds you have in this type of account are not taxable. When your balance gets large enough, most trustees allow you to invest your funds in mutual funds, bonds or stocks.

HSA contributions can be reduced and added to throughout the year. The IRS delayed until May 17, 2021 the deadline to make prior year contributions so if you did not max out your 2020 contributions, you still have time to do so.

What are the advantages of a health savings account?

There are many advantages to using a health savings account, including:

– Typically, there is no initial deposit required to open an account: HSAs are portable and you can change trustees once every 12 months. Bank and credit union HSA accounts are insured up to $250,000.

– Your employer or other eligible family member can contribute to your HSA although the maximum contribution limits still apply. Employer contributions are not counted as income and you can claim a tax deduction for contributions you make and for contributions a family member makes.

– Funds can be used to pay for qualified medical expenses for a spouse and dependent children even if they are not covered under your health plan.

– After retirement, funds can be used to pay for Medicare or Medicare Advantage plan premiums (but not Medigap policies).

– After age 65, withdrawal of funds for non-medical uses avoids the 20% penalty although these withdrawals are considered as taxable income. Some people have used their HSA nest egg to purchase investment property.

– Funds can be transferred out of your investment portion of your account (typically mutual funds or stocks) as needed to pay for approved medical expenses.

– For those not working, you can still contribute to your HSA account. Although these contributions won’t be pre-tax, they can be deducted on your tax return.

What are the disadvantages of a health savings account?

It’s important to consider the potential disadvantages of using a health savings account.

– Withdrawal of funds for non-medical purposes prior to age 65 are considered taxable income and a 20% penalty is also assessed by the IRS.

– Some big box stores and other merchants do not accept HSA cards and you will have to obtain reimbursement from your HSA trustee.

– If you are claimed as a dependent on someone else’s tax return, you are not eligible for an HSA.

– Expenses can be audited by the IRS so you will have to keep receipts for all purchases.

– Interest rates on HSA accounts are low and some trustees charge a monthly fee if your balance drops below a certain threshold.

– If you don’t stop contributing to your HSA six months before you apply for social security benefits, tax penalties may apply.

– After an individual has attained age 65 (Medicare eligibility age), additional contributions (including catch up contributions) can no longer be made, even if still employed.

– Minimum balance requirements may apply before you can invest; investment options may be limited and investments are not insured.

©2021 Bankrate.com

Distributed by Tribune Content Agency, LLC

Tags: BankrateConsumer ContentHealth Savings AccountHSA
ShareTweetShare
Beth McGuire

Beth McGuire

Recently promoted to Vice President, Online Editorial, Beth McGuire oversees the editorial direction and content of RISMedia’s websites, and its daily, weekly and monthly newsletters. Through her two decades with the company, she has also contributed her range of editorial and creative skills to the company’s publications, content marketing platforms, events and more.

Related Posts

NAR
Industry News

NAR Praises ‘Big Beautiful Bill’ as ‘Major Win’ for Real Estate

July 3, 2025
Mortgage Rates Post Biggest Drop Since March 2025
Industry News

Mortgage Rates Post Biggest Drop Since March 2025

July 3, 2025
Upbeat New Jobs Report in June Leaves Housing in ‘Holding Pattern’
Agents

Upbeat New Jobs Report in June Leaves Housing in ‘Holding Pattern’

July 3, 2025
The AI Advantage: Experts Share How AI Is Revolutionizing Real Estate—and Why the Potential for Agents Is Limitless
Best Practices

The AI Advantage: Experts Share How AI Is Revolutionizing Real Estate—and Why the Potential for Agents Is Limitless

July 3, 2025
The 3 ‘Hottest’ Markets in Each Region This Spring
Agents

The 3 ‘Hottest’ Markets in Each Region This Spring

July 2, 2025
5 Signs a Senior Homeowner May Be Ready to Downsize
Agents

5 Signs a Senior Homeowner May Be Ready to Downsize

July 2, 2025
Please login to join discussion
Tip of the Day

4 Ways to Market to the Next Generation of Buyers

Every new generation has a chance to upend the status quo, introduce new ideas into the zeitgeist and radically shift the priorities of a society.

Business Tip of the Day provided by

Recent Posts

  • NAR Praises ‘Big Beautiful Bill’ as ‘Major Win’ for Real Estate
  • Mortgage Rates Post Biggest Drop Since March 2025
  • Upbeat New Jobs Report in June Leaves Housing in ‘Holding Pattern’

Categories

  • Spotlights
  • Best Practices
  • Advice
  • Marketing
  • Technology
  • Social Media

The Most Important Real Estate News & Events

Click below to receive the latest real estate news and events directly to your inbox.

Sign Up
By signing up, you agree to our TOS and Privacy Policy.

About Blog Our Products Our Team Contact Advertise/Sponsor Media Kit Email Whitelist Terms & Policies ACE Marketing Technologies LLC

© 2025 RISMedia. All Rights Reserved. Design by Real Estate Webmasters.

No Result
View All Result
  • Home
  • Premier
  • Reports
  • News
    • Agents
    • Brokers
    • Teams
    • Consumer
    • Marketing
    • Coaching
    • Technology
    • Headliners New
    • Luxury
    • Best Practices
    • National
    • Our Editors
  • Publications
    • Real Estate Magazine
    • Past Issues
    • Custom Covers
  • Events
    • Upcoming Events
    • Podcasts
    • Event Coverage
  • Education
    • Get Licensed
    • REALTOR® Courses
    • Continuing Education
    • Luxury Designation
    • Real Estate Tools
  • Newsmakers
    • 2025 Newsmakers
    • 2024 Newsmakers
    • 2023 Newsmakers
    • 2022 Newsmakers
    • 2021 Newsmakers
    • 2020 Newsmakers
    • 2019 Newsmakers
  • Power Broker
    • 2025 Power Broker
    • 2024 Power Broker
    • 2023 Power Broker
    • 2022 Power Broker
    • 2021 Power Broker
    • 2020 Power Broker
    • 2019 Power Broker
  • Join Premier
  • Sign In

© 2025 RISMedia. All Rights Reserved. Design by Real Estate Webmasters.

X