Sure, you've probably heard the kids' version of the Three Little Pigs, but let me tell you how this little piggy bank figured out a way to set aside some money for health care expenses and build up a buffer for retirement, all while fending off federal taxes.
That's because this little piggy bank took advantage of a Health Savings Account, also known as an HSA.
Here's how it works. You set up your account, and then you can elect how much you'd like to contribute per paycheck to your HSA, up to an annual limit set by the IRS. You can then use that money on qualifying medical, dental, and vision expenses, or save it for the future.
As a bonus, you'll also have the chance to invest your HSA funds, giving your account the opportunity to grow even more. And guess what? Any interest your account earns will also be safe from federal taxes!
That's because any money you put into the account will be taken out of your paycheck before federal taxes are applied, making it pretax. And when it's invested, that money grows pretax.
Plus, since you own the account, the money stays with you, no matter where life takes you.
Of course, you don't have to contribute to an HSA, but if you decide not to, the IRS may take a bigger bite out of your savings than it would otherwise. Contributing to an HSA can help you stay in control of your health care finances, and fend off federal taxes.
So, if you're like this little piggy bank and like the sound of an HSA, look for this stamp next to qualifying plan options during enrollment.
HSA Video