Health Savings Accounts: Good Medicine for Some Individuals


Like an apple a day that keeps the doctor away, IRS-approved health savings plans help people avoid bankruptcy caused by catastrophic illnesses. The U.S. Internal Revenue Service (IRS) provides a couple of ways for people to save for future medical expenses before paying taxes on their earnings. One popular choice: Health Savings Accounts (HSAs).

Health Savings Accounts let you set aside tax-free money for future medical expenses

A 43-year-old, single software engineer, who wants to be known only as Sam, opted for Health Savings Accounts (HSAs) with every job he’s held so far in his career. He first chose that option as an employee; later, as a self-employed independent contractor. Each year since health savings accounts became available, he’s socked away an IRS-defined amount of his paycheck tax free to help cover future medical fees. Sam says he’s already saved enough, along with interest and dividends earned on his HSA investments, to give him peace of mind.

“When I did the math, I knew right away that an HSA account was a no-brainer for me,” Sam explains. Although   he’s healthy and able to work now, Sam has a medical condition that could be very expensive later in life, so he’s thinking ahead. His HSA account is his health care safety net. “The truth is,” Sam says, “most aging people will have heavier medical bills later in life. Without an HSA, major illnesses can break someone’s bank account.”

With a triple tax advantage, an HSA account could be a wise investment                                                       

Considering its multiple tax breaks, an HSA account adds up to a windfall for anyone who gets sick sometime in the future. Sam explains that the Internal Revenue Service allows him to:

  1. Put some of his earnings into his HSA account before taxes are deducted.

  2. Earn tax-free compound interest and dividends for years on savings and investments in his HSA.

  3. Withdraw tax-free every dollar that has accumulated to pay for health care expenses.

“To top it all off,” adds Sam, “I have a source of money to cover any medical emergencies without worry.”

 Package deal: Health Savings Accounts and health insurance are packaged together in plans offered by most major insurance companies and many employers. Eligible account owners pay monthly insurance premiums, but can choose to cover medical bills out-of-pocket or out of their HSA account, depending on their long-term health prognosis. Since HSA accounts never expire, savings can accumulate over the owner’s lifetime. Some companies chip in money toward employees’ HSA accounts. A few fund the whole thing, or match staff’s annual contributions.

For 2019 IRS contribution limits for Health Savings Accounts, call Ron VanSurksum at 616-531-5220.



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Ronald Van Surksum, CFP                4555 Wilson Ave SW – Suite 2               Grandville, MI 49418                                Phone: (616) 531-5220                           Cell: (616) 450-8439

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