Question

HSAs have lower ______ than IRAs and are funded with ______ contributions.

A) Taxes, tax-deductible
B) Expenses, tax-free
C) Returns, non-deductible
D) ees, taxable

Answer 1

Health Savings Accounts (HSAs) have lower expenses than Individual Retirement Accounts (IRAs) and are funded with tax-free contributions. Option B is correct.

Step-by-step explanation:

Health Savings Accounts (HSAs) have lower expenses than Individual Retirement Accounts (IRAs) and are funded with tax-free contributions. The purpose of an HSA is to provide a tax-advantaged account specifically for saving money to pay for medical expenses. In contrast, IRAs are designed to encourage long-term savings for retirement, allowing individuals to contribute pre-tax income, which then grows tax-deferred until withdrawal in retirement.

Both accounts serve to increase the effectiveness of saving by providing tax advantages, though for different purposes. The HSA offers immediate tax savings because contributions are tax-free and can be used to pay medical expenses also without being taxed. IRAs provide a deferred tax advantage, since you don't pay taxes on the money when you contribute but rather when you start taking distributions in retirement.