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A Health Savings Account (HSA) is one of the most versatile tools for covering medical expenses and investing for the future. HSAs combine tax advantages, long-term savings potential, and flexibility, making them a valuable addition to your financial plan. 

What is it exactly? HSAs are tax-advantaged savings accounts available to individuals who have a high-deductible health plan (HDHP). It allows you to set aside pre-tax dollars for qualifying medical expenses. But beyond covering immediate health costs, an HSA has long-term potential and can be rolled over and used for retirement savings.

Benefits of HSAs

1. Triple Tax Advantage: HSAs offer three levels of tax savings:

• Contributions are tax-deductible, lowering your taxable income.
• Interest, dividends, and capital gains grow tax-free within the account.
• Withdrawals for qualified medical expenses are tax-free.

2. Rollover Flexibility: Unlike Flexible Spending Accounts (FSAs), HSAs are not “use-it-or-lose-it.” Any unused funds roll over each year, allowing your balance to grow over time. This makes HSAs dually dependable as a safety net to cover healthcare costs and for supplementing retirement.

3.  Portability: Your HSA belongs to you, not your employer. This means you can take it with you if you change jobs or retire, making it a long-term financial tool rather than a short-term benefit.

Maximize Your HSA

1. Contribute the Maximum: For 2024, the contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those aged 55 and older. Contributing the maximum helps you build a robust balance faster, maximizing tax savings and giving you a larger return on your investment.

2. Pay Out-of-Pocket for Smaller Medical Expenses: If you can afford it, consider covering minor medical costs with other funds rather than tapping into your HSA. 

3.  Save for Retirement:  Once you reach age 65, you can withdraw HSA funds for non-medical expenses without a penalty (though you’ll pay income tax, like a traditional IRA). This can be a helpful source of supplemental retirement income, especially if you've built a substantial balance.

When you open an account at Community First Bank you always have someone to turn to if questions arise. Plus, you’re supporting locally. Our deposits are funneled right back into our communities in the form of loans that help individuals, families, businesses and farms grow and prosper.

If you currently subscribe to a high-deductible health plan, but don’t yet have an HSA, see the local experts at Community First Bank. Contact us today if you'd like to learn more.