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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
A Medical Savings Account could be the answer for Medicare holders. What You Should Know About Medical Savings Accounts for Medicare Holders By Britt Erica Tunick If there is anything more unpleasant than being sick or needing medical care, it is the cost of paying for medical services. And the prospect of paying exorbitant medical bills is even less appealing for anyone who has already retired, is no longer earning a regular paycheck and is on Medicare. So if that describes you, or anyone you are close to, something you may want to look into is a medical savings account (MSA). Similar to health savings accounts (HSAs), MSAs are interest bearing healthcare savings plans for future medical costs. Like HSAs, MSAs are linked to high deductible healthcare plans, in this case certain types of Medicare Advantage plans (essentially high deductible Medicare plans), and the money put into them can only come from Medicare through the insurance company that maintains the Medicare recipient’s plan. While the money in an MSA can only be used for expenses related to healthcare (excluding prescription drugs), there is no set timeframe the money must be used by and any money invested into the account, as well as the interest that it generates, will continue to accrue on a tax-free basis until it is eventually needed. Money removed from an MSA that is used on anything other than healthcare costs is recognized as taxable income and will also incur a 50% tax penalty. For Medicare recipients who are in fairly good health and are unlikely to be hit with significant medical costs, MSAs can be an appealing option because of the power of compounded growth. And since there is no risk of allowing money to build within an MSA, if an account holder reaches a point where their health situation changes and they do find themselves facing more significant costs, the money within an MSA can be used at that point. The one major drawback of MSAs is that since they are not yet widely used, they are not yet available everywhere. |
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