Top 5 reasons to use a Health Savings Accounts

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1. Your paycheck goes further with pre-tax contributions

Health Savings Accounts (HSAs) offer a potential triple tax advantage:1

  1. Through payroll deductions, you can make contributions to your HSA on pre-tax basis. Because you don’t pay federal taxes, the money you put in your HSA could go further in paying for your family’s health care.
  2. Federal tax-free interest and investment earnings could help you save more for qualified expenses.
  3. Withdrawals for qualified health care expenses are also federal tax-free when paying for qualified health care expenses.

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2. Your HSA doesn’t expire

Any unused funds in your HSA roll over from year to year and are available to you anytime, now and in the future. You can spend this year for routine health care expenses or save to help you be prepared for expenses in the future. It doesn’t matter if you change jobs, change health care plans or retire, the money in your HSA is yours for life. And, when you designate a beneficiary, the benefits of your HSA will transfer to your heirs.

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3. The HSA investment feature2 provides the opportunity to put your money to work for your future

With the option to invest your HSA balance in a wide range of mutual funds, you have the opportunity for potential federal tax-free earning that could help you build your account balance over time. You can set up your investment account at any time, and the sooner you get started with saving and investing your HSA balance, the more time you’ll have to potentially build your health care nest egg for retirement.

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4. Your HSA is flexible to help you meet your needs and goals

When you use your HSA depends on your day-to-day needs and long-term goals. While you have the flexibility to withdraw as little or as much as you need to help pay for health care expenses, the HSA is really designed to help you save money and build up your balance so that you’re prepared for future health care expenses, including in retirement when you're likely to have more medical expenses and less income.

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5. An HSA can help you take care of your loved ones

If you claim a family member on your taxes, you can use your HSA money for their qualified medical expenses – even if you just have single coverage.

1Potential Tax Advantages: You can receive federal income tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax, unless an exception applies. Any interest or earnings on the assets in the account are federal income tax-free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA directly (not through payroll deductions). In addition, HSA contributions may reduce your state income taxes in certain states. Certain limits may apply to employees who are considered highly compensated key employees. Bank of America [and Merrill] recommends you contact qualified tax or legal counsel before establishing an HSA.

2Investing involves risk. There is always the potential of losing money when you invest in securities. When selecting investment funds for your HSA, take into consideration your overall portfolio strategy in other longer-term investments such as a 401(k) plan or IRA to ensure you are aligned with your financial goals and priorities.