There's a reason it pays to contribute to a health savings account (HSA) if your medical insurance is compatible with one. HSAs offer a world of tax breaks that no other account offers.
With a traditional IRA or 401(k) plan, you get tax-free contributions. With a Roth IRA or 401(k), you get tax-free gains and withdrawals.
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An HSA gives you all three, making it a powerful savings tool you can use to cover near-term healthcare expenses or expenses that arise later in life. In fact, the nice thing about HSAs is that your money doesn't have an expiration date, so you can reserve your balance for retirement if you choose.
Meanwhile, you may be surprised by some of the things an HSA can cover. Here are three you should know about.
1. Dental care
Don't assume your HSA is only for medical care. If you need dental work done, whether it's having a cavity filled or a crown put on, you can use the money in your HSA to pay for it.
Furthermore, if you have kids and you're wondering how you're going to swing the cost of braces, you should know that HSAs allow you to get reimbursed for orthodontic expenses. Or, you may decide to invest in orthodontic treatment for yourself as an adult. Your HSA can cover that, too.
2. Vision correction surgery
You may be aware that eye exams, glasses, and contact lenses are all HSA-eligible expenses. But did you know that you can also use an HSA to pay for vision correction surgery like LASIK? If you feel that such a procedure could improve your quality of life but you've been putting it off due to the cost, you may want to reconsider if your HSA has a pretty nice balance.
3. Long-term care insurance
If you end up needing long-term care, whether it's a home health aide, assisted living, or a nursing home, Medicare won't pick up the (very expensive) tab. That's why it's a good idea to put long-term care insurance in place.
However, those premiums could be costly, too. But the good news is that you can use your HSA to cover the cost of those premiums within certain limits.
Read up on your HSA benefits
If you're going to fund an HSA, it's important to make the most of that account. And that means knowing what expenses are and aren't eligible. Familiarizing yourself with the rules could make it easier to cover the various health-related costs you incur, thereby minimizing your financial stress.
