What is a medical savings account?

The on Medical Savings Account (MSA) has become effective on January 1, 1977, during the term of then president Bill Clinton. Despite the advantages it claimed, the law restricted many people from availing of the benefit. Its guidelines were pretty strict and at the time, only 750,000 individuals were eligible. Thankfully, in recent years, new amendments have been enacted, thereby allowing more Americans to avail of the MSA from a chosen financial institution.

 Perhaps you’re wondering exactly what a medical savings account is. In simple terms, it is a savings account which enables the depositor to set aside a portion of their income for possible medical expenses which they may incur in the future.

You or your employer will be taking money which is currently spent from your health insurance and make a deposit into your medical savings account. The amount deposited into your account is just a portion of your health insurance that costs up to $1,400 per person or $3,375 for the whole family.

With the use of the fund from your MSA, your first payment of $1,400 will be made directly. The fund on your MSA will be used to pay for your medical expenses which are tax deductible at the current. The coverage is actually broad an there are about a hundred of them. Chiropractor, dental services, eye glasses, doctors, acupuncture, anesthetist and the list continues.

When there is some money left from your MSA, you have two options on how to spend them: you can save some money which is tax-free which you can use for medical expenses in the future and that the interest which is accumulated is also tax-free. You to may withdraw your money from your MSA after each year but a minimum maintaining balance is needed. If there would be some non-medical withdrawals made then it would be taxed in full with a penalty of 15%.

Medical Savings Account is seen by a lot as a way to reduce the country’s bill on health care while the choices of patients are improved.

The public had been exposed to a lot of erroneous information regarding MSA’s. There had been some speculations that MSA’s are just meant for the healthy and those with money but there hasn’t been proofs yet regarding this claim. Based on a research conducted, almost fifty percent of respondents say that they will take an MSA if and when they are offered.

This is not a typical savings account so it is important you make a good research about it before you start using it.