You’ve been there. You’re cruising along life, you’re healthy, you’re happy – you’re basically crushing it. Then, with the force of a Floyd Mayweather punch, [insert unforeseen event] happens, and you’re hit with a massive medical bill. Ouch.
Luckily, there’s a way to soften the blow and keep more money in your pocket when your health throws you a curve.
Remember that saying, “Sticks and stones may break my bones, but words can never hurt me?” Think of the savings account plan as your invincible shield against words… or rather, the wordy, hard-to-understand medical bills that come acallin’.
There are three types of savings account plans most employees choose from, depending on what’s offered under their employer’s benefit plan. They are:
Although they each have their own unique benefits, they are all alike in that they are tax-advantaged. In plain English, tax-advantaged simply means that the money you contribute to the account is deposited before taxes are taken out. This, in turn, lowers your taxable income and increases your take home pay.
That’s what a fighter might call a win-win.
It’s not just to be confusing, as you might be thinking. Healthcare isn’t always easy to comprehend, but these three accounts aren’t there to intentionally confuse you.
As tempting as it may be to just pick one of the three and go with it, there are important differences among the 3 plans, which can, at a minimum, help you save money on your annual medical expenses. And at a maximum, healthcare savings accounts can earn you thousands of dollars in tax-free money to help pay for medical expenses or even retirement down the road.
Choosing the right plan will ultimately come down to your ability to accurately predict any medical expenses you have before you enroll in a plan and figuring out how much each plan would cost you over the plan year.
Whoa, math! Am I right? Adulting is hard. But if you plan a healthcare savings account plan into your budget, you will be adulting hardcore.
Decisions like whether or not you are getting married, changing careers or starting a family will all affect which plan option is best for you. Planning these major life events ahead of time will allow you to make sure you have the best plan each year, and by doing this, you can more accurately estimate what your medical expenses for the upcoming plan year.
With proper planning and education, you can choose a health plan and savings option that is right for you so you’ll never have to worry about pulling a muscle swinging at that unexpected curve ball.