MSAs
Today, more than ever individuals should be concerned about
their retirement savings, and if they will have enough to see
them through their golden years. Currently, social security
benefits are all that many Americans have to see them through
their retirement, and with inflation, escalating medical
expense, and prescription drug costs, many senior citizens
simply cannot make ends meet on their fixed incomes. In addition
to these concerns, many of our citizens known as the "baby
boomers" are reaching retirement age. With more and more of our
population retiring, the need for adequate funding is an ever
increasing concern for all individuals. MSAs, or medical savings
accounts, are an excellent tax deductible way to save for your
future, and provide for emergency expense at the same time.
Prior to 1999, there was no such creature as an MSA, nor was
there the existence of a 100% tax deduction for medical
insurance premiums paid by an employer. Today, thanks to a bill
passed in Congress, all taxpayers have access to MSAs as a way
to save and look ahead to possible medical emergencies. What
benefit exactly do MSAs provide? MSAs can provide a gap between
individuals who are uninsured, and the ability to afford
adequate health care. The contributions to MSAs are tax
deferred, and this acts as an additional incentive for
individuals to make a contribution.
With all the fluctuation of the stock market, investments that
individuals had in the stock market, may or may not still
provide adequate funding for their retirement. Many individuals
that had retired and placed their funds in stocks have now found
that they must return to work, even if only part-time, in order
to maintain their current standard of living. That's a place no
retired individual wants to be. The MSA plans offer less of a
return, buy they're also a much safer option. Today, the MSA
language is being replaced by the HSA language. What are their
differences? The original HSA was created during the Medicare
Reform Act of 2003, and the currently combine high-deductible
health insurance with a personal savings account for medical
expenses. The money that an individual deposits in the HAS is
allowed to grow tax-free, and can be used penalty free to
purchase health care, or pay for services not covered by their
insurance plan. Any monies not used, are allowed to remain in
the HSA completely tax free, for an indefinite number of years.
There aren't any basic differences, except that the HSA bill
allows for more freedom of choice in making decisions about the
withdrawal of the saved monies, and the linking of a savings to
the requirement of obtaining health insurance.
Many supporters of the HSA reform have suggested that a couple
of things happen in order for the individuals who own the HSAs
to have more control over their medical decisions, and to
encourage more savings, and more competition among insurance
companies. First, they would like to see the individual
contribution limit increase to $8000 for singles and $16,000 for
married couples. Second, they would like to eliminate the
requirement that HSA holders obtain health insurance, and
instead allow tax-free withdrawals from the HSAs to pay for
health insurance premiums as well as health care. Would this
help a struggling healthcare reform? Quite possibly, since more
of the public would be encouraged to participate if the health
insurance premiums and health care services could be paid for
with tax-free dollars. The biggest catch to the passage of such
a proposal is the loss in revenue to the government. Since
individual taxpayers account for over half of the government's
revenue each year, making health savings accounts a pre-tax
deduction, and then also making the withdrawal of such monies
tax free if used for health insurance or medical expense, would
virtually eliminate any benefit to the government for revenue
tax.
Is a program such as this beneficial? Yes, it would tremendously
benefit the taxpaying public; but will it ever pass through a
Congress concerned with revenue increases each year? Probably
not.