Wealthy Use Health Savings Accounts as Tax Strategy
Some of the "biggest beneficiaries" of health savings accounts "are proving to be well-to-do investors looking for another way to fund their retirement savings," the Wall Street Journal reports.
The Journal states, "Unlike the more widely used and better-known flexible spending accounts," HSAs provide beneficiaries "more control over -- and a bigger stake in -- their health spending," and "savings not needed to pay for out-of-pocket medical expenses can accumulate ... for years." According to the Journal, making the maximum allowable annual payments to an HSA "can be an astute financial strategy for the well-heeled" and "can provide a valuable source of retirement income alongside" 401(k) and individual retirement accounts.
However, HSAs are "less favorable for lower-income unhealthy people because out-of-pocket expenses increase" with the amount of health services used, and the "tax advantages aren't as great for people in lower brackets" (Knight, Wall Street Journal, 1/5).
An increasing number of businesses looking to help their workers with health insurance costs "are turning to the HSA model as a way to protect themselves from escalating premiums and to offer their employees a creative way to shelter their wages," Richard Bernstein, CEO of the insurance advising firm Richard S. Bernstein & Associates, writes in a Miami Herald business column.
Bernstein writes that HSAs are "growing in popularity among employers" because the accounts are not affected by the "'use it or lose it' provisions" if the "accumulated funds are not ... used for medical expenses"; they "provide an attractive way to save money" that "grows tax-free"; and the accumulated funds can be "used tax-free to pay Medicare deductibles and long-term care insurance" (Bernstein, Miami Herald, 1/7).