It’s that time of year again. No, not football season. Or the start of the holiday shopping season. It’s open enrollment season. As you review your current healthcare selections and research your options, there are two financial options we hope you’ll keep top of mind. Health savings accounts and Individual retirement accounts. Here are a few things to consider.
The Healthy Benefits Of A Health Savings Account (HSA)
To lower your monthly expenses and increase your take-home pay, you may be considering a high-deductible health insurance plan (HDHP). As the name implies, if you have a high-deductible health plan, generally, the monthly premiums are less than non-high-deductible plans. One added benefit of an HDHP is that you can also enroll in a Health Savings Account (HSA).* An HSA lets you put aside money and withdraw it tax-free when using it for qualifying medical expenses not covered by your HDHP. Here are just some of the things you can pay with your HSA funds:
- Qualified out-of-pocket medical expenses not covered by your health plan
- Medical, dental, or vision coinsurance and co-payments
- Prescription drugs
- Preventative health care
- Ambulance fees
- Mental healthcare
- Long-term care insurance premiums
- Prescription eyewear and supplies
The contributions you make to your HSA can be deducted from your taxable income for federal and most state income tax; any interest and investment earnings in your HSA accumulate tax-free. However, HSAs have maximum annual contribution limits; visit irs.gov or call their toll-free hotline at 1.800.829.1040 for the latest information. If you don’t use all of your HSA funds in a year, the unused funds roll over from year to year. After age 65, you can withdraw funds from the account for non-medical expenses, but these funds will be taxed.
Make A Healthy Financial Decision
HSAs make good financial sense and are a smart way to help pay for qualified medical, dental, and vision care. If an HSA sounds right for you, check out our HSA that earns an impressive 2.50 APY*. There are no fees or minimum balance; we gladly accept rollover funds, and the account comes with powerful tax advantages. Remember, we will reimburse Credit Union Members for fees related to transferring your HSA from another institution to the Credit Union, but this offer is only available for a limited time. Visit your local branch or call us at 800.877.2345 to get started.
A 401(k) Isn’t The Only Way To Save For Retirement
While most people focus on their healthcare during open enrollment, it’s also a great time to consider your 401(k) decisions and if it’s time to open an individual retirement account (IRA).
The official deadline to open an IRA is generally until tax day for the prior year. So, you can open and make a 2023 contribution to a Roth or Traditional IRA until April 15, 2024. But why wait to save for retirement? The sooner you start, the more you can leverage time to hopefully increase the value of your investments, and the quality of your retirement years.
Much like an HSA, an IRA gives you tax advantages. With a traditional IRA, you defer paying taxes until you withdraw the money for your retirement. The thinking is that during retirement, you’ll be in a lower tax bracket than you are today and, therefore, will have to pay less taxes.
However, if you want to avoid paying taxes on your contributions during retirement, a Roth IRA may be the right choice for you. With a Roth IRA, you pay the taxes on your contributions, and your funds can grow tax-free, with tax-free withdrawals during your retirement, providing certain conditions are met. As with an HSA, there are limits on how much you can contribute to an IRA annually. To dive a bit deeper into the world of IRAs, read our recent IRA 101 blog.
Start Saving For Retirement Now
We offer Traditional IRA, Roth IRA, and SEP IRAs to help you secure your financial future. The right one for you depends on several factors, including your age, income, and employment status. Before deciding which is best for your situation, speak with your tax advisor about tax consequences and do some research on irs.gov. Then, visit our IRA page for more information and to sign up for your IRA.
A Last Word On Open Enrollment
The open enrollment period is just a few weeks long. The decisions you make can dramatically impact your personal and financial health. We encourage you to review your current plans and all your options to ensure you’re meeting the needs of you and your family.
One Final Thought
The holiday season is full of good cheer, but also fraudsters. We will NEVER call or text you for any personal information, username, passwords, or passcodes. If you receive a call or text from any number or person claiming to be an employee of the Credit Union requesting this information, HANG UP AND CALL US DIRECTLY at 800.877.2345. Have a safe and wonderful holiday season!
*Consult your tax advisor or refer to IRS Publication 502. Contribution limitations and other restrictions apply to HSAs. To have a Federally Qualified HSA, you must purchase and maintain a HDHP with minimum deductibles of $1,300 (individual) and $2,600 (family), and maximum out of pocket expenses less than $6,850 (individual) and $13,700 (family). Generally you cannot be covered by another low-deductible health insurance policy. The tax treatment of HSA contributions and distributions under your state’s income tax laws may differ from the referenced federal tax treatment, and from state to state. Consult with your financial or tax advisor for more information. This Credit Union is federally-insured by the National Credit Union Administration.
Refer to section 213 (d) of the IRS Tax Code. Visit the U.S. Department of Treasury website for up-to-date contribution limits and more detailed information on plans and taxes.