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Make the Most of Your Health Savings Account

Health Savings Accounts (HSAs) are savings accounts that are used to pay for qualified medical expenses. In order to contribute to an HSA, you have to have a high-deductible health plan (a/k/a HDHP). 

What’s so great about HSAs? Three tax advantages:
1) Contributions to the HSA are tax deductible
2)The money grows tax-free while it’s sitting in the HSA
3)Withdrawals from the HSA are not taxed if the money is used for qualified medical expenses

For a complete list of qualified medical expenses, refer to IRS Publication 502 Medical and Dental Expenses on the IRS website at www.IRS.gov.

There is one caveat with these accounts: if you withdraw money from the HSA when you are younger than age 65 and you don’t use the money for qualified medical expenses, the IRS will impose a 20% penalty on the amount withdrawn. That is a steep fine. 

HSAs can be a very powerful tool if used properly and they fit very well into a comprehensive financial plan. At Rand Financial Planning, we help our clients prepare for safe and secure retirements by building a comprehensive financial plan and then guiding them through retirement. Contact us to find out how we can help you plan for your retirement.

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