What Is a Health Savings Account (HSA)?

For the average business and consumer, health insurance is a major chunk of the budget. One way consumers and employers are trying to keep health insurance costs down is by offering or choosing a high-deductible health plan (HDHP). These plans, as you might guess, come with high deductibles, but also more affordable premiums. Health savings accounts, or HSAs, are often offered in tandem with HDHPs. 

HSA Basics

Image courtesy http://401kcalculator.org

HSAs are essentially savings accounts used for medical expenses. You can use money from your HSA to pay eligible medical expenses, such as co-pays, prescription medicines, and other medical and dental care as determined by your HSA. Usually you’ll receive checks and/or a debit card from your HSA account to use to pay your medical expenses. Unfortunately, you usually can’t pay insurance premiums with HSA funds.

To be eligible for an HSA, you must be covered under a high-deductible health plan (for 2016, a high deductible health plan must have a minimum deductible of $1,300 for an individual, and $2,600 for a family). You won’t be eligible for an HSA if you are enrolled in Medicare, claimed as a dependent on someone else’s tax return, or covered by other insurance.

Health insurance providers or your employer may offer HSA options along with a high-deductible health plan. If not, you can open your own HSA through a qualified financial institution (contact us if you need a recommendation).

 Each year the IRS sets the maximum amountthat can be paid into an HSA. For 2016, those limits are $3,350 for individuals, and $6,750 for families.  Your employer can contribute to your HSA but the total contributions from you and your employer must still be within the contribution limits.

Benefits of HSAs

One of the major benefits of investing in an HSA is that you don’t play taxes on the money you deposit into it, thus reducing your taxable income. You also don’t pay taxes on money you take out of your HSA as long as you use it for eligible medical expenses. You will be taxed (and penalized 20%) if you take it out for non-medical expenses before age 65. After age 65, if you take out money for non-medical expenses, you will be taxed, but not penalized.

You always own and control the money in your HSA. You decide how much to contribute. If you don’t spend it in one year, it rolls over to the next. If you change jobs or leave the job force, the money is still yours.

Some HSA companies allow you to invest your HSA funds, and the earnings from those investments are also not taxed.

Contributing to an HSA can be a smart way to save for future medical expenses. Contact Lakewood Financial for more information about health insurance or health savings accounts. 

Flood Insurance Is Now More Affordable

The recent flooding in the wake of Hurricane Hermine reminds us that living in Florida can be a soggy business. Since Florida is essentially flat, the entire state is at risk for flooding. If you’ve been reluctant to buy flood insurance because of the cost, we’ve got some good news for you.

It’s true that flood insurance rates have been rising. The National Flood Insurance Program (NFIP) is still pulling itself out of $24 billion dollars of debt incurred following losses from Hurricane Katrina and Superstorm Sandy, and government subsidies of flood insurance rates are being phased out. However, at Lakewood Financial, we represent several private companies that write flood insurance policies at a more competitive rate than the NFIP policies.

Here are some basic things to remember about flood insurance:

  • Flood insurance is not included in a standard homeowners insurance policy and must be purchased separately.
  • If you live in a flood zone and have a mortgage backed by a federal lending guarantor (Freddie Mac, Fannie Mae, etc.), you must carry flood insurance.
  • Even if you don’t live in a high-risk area, you should consider buying flood insurance to protect your home. Be aware that 25% of flood claims come from preferred zones B, C and X.
  • Even a few inches of water can do major damage. The average flood insurance claim is $43,000, according to FloodSmart/gov.
  • The average NFIP flood insurance policy costs about $700 year.  However, at Lakewood Financial, we represent several private companies that could save you a substantial amount on your policy.
  • NFIP flood insurance covers your home and your possessions (with some exceptions). Your home’s structure can be insured up to $250,000, and its contents can be insured up to $100,000.  Private flood companies offer higher limits, up to $500,000 on your home, and up to $250,000 for contents.
  • With NFIP policies, there is a 30-day waiting period after purchase before flood insurance goes into effect. With most of our private companies, there is no waiting period after the policy is bound. 

Consider buying flood insurance insurances to protect your greatest asset—your home. Contact us today for a free quote.