Benefits of a Health Savings Account

In 2004, health savings accounts were first introduced. Although this type of plan is not right for every American, they do offer some benefits. Through the use of a health savings account, employees can invest money pre-tax which allows them to in turn create a lower health insurance burden.

In a one year span during 2005 and 2006, the number of health savings account in the United States more than tripled from 1.1 to 3.6 million. As the health insurance industry continues to struggle, more workers will surely consider what these plans have to offer.

Here are several reasons as to why health savings accounts are becoming more popular.

1. With a health savings account, you will never lose the money that you put into it. Some people are under the impression that they are forced to use the funds or they will be lost after a year; this is not the case. The money that you put into a health savings account can be used in the future for any qualified medical expense.
2. What if you change your health insurance or go on Medicare? This does not mean that a health savings account will go to waste. You can use the money to pay for things such as long term care insurance or deductibles associated with Medicare.
3. You will fund your health savings account with pre-tax dollars. The way that you add money to your health savings account is similar to that of a 401(k). The main difference is that money in a health savings account grows in a tax free manner, while 401(k) dollars grow tax deferred until the day that the funds are withdrawn.

As you can see, a health savings account may be an answer to some of your problems. If you opt for one of these accounts, you can stock away pre-tax dollars that can pay for medical related expenses in the future.