Health Savings Account (HSA) Increasing your healthcare buying power at every age and stage

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1 Health Savings Account (HSA) Increasing your healthcare buying power at every age and stage

2 Helping you get more for every healthcare dollar We know how hard it can be to pay for today s medical expenses while saving for tomorrow and preparing for retirement. A Wells Fargo Health Savings Account, or HSA, makes it easy to get more with every dollar you spend, save or invest. Increase your healthcare buying power Because the money you contribute to your HSA is tax-deductible, using your HSA to pay for qualified medical expenses from doctor s fees and dental work to prescription and over-the-counter medications can help maximize your healthcare buying power. 4 What is an HSA? A Health Savings Account (HSA), is a personal savings account you can use to pay for current and future qualified medical expenses tax free. The account and all the funds in it belong to you, even if you change jobs or insurance carriers. A smart choice at any age or stage Once you put money in your Wells Fargo HSA, it s yours to use, save or grow tax free. 1 Use it today Want to pay for current healthcare expenses? Use your convenient Wells Fargo Visa HSA debit card or pay with cash for later reimbursement. Save for tomorrow The Wells Fargo HSA rewards you with competitive rates of interest as the balance in your FDIC-insured cash account grows. 2 You can also pre-select investment options, so when your HSA reaches a minimum deposit account balance, future contributions will be invested automatically. You decide how active an investor you want to be. 3 Without HSA With HSA Income $1,000 $1,000 25% federal income tax 5 $250 $0 Healthcare buying power $750 $1,000 Grow for retirement You can grow any unused money in your HSA, year after year, without paying taxes on either the interest or investment income you accrue. That s an important advantage to anyone saving for retirement. You won t ever be taxed, even after you retire, as long as you use the money in your HSA to pay for qualified medical expenses. 1) Tax references are at the federal level. State taxes may vary. Please consult a tax advisor. 2) Interest rates are subject to change and current rates are published at wellsfargo.com/hsa. 3) INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE 4) This example is for illustrative purposes only. Tax consequences may differ based on individual circumstances. Please consult your tax advisor regarding your individual situation. This chart assumes all distributions are used for qualified medical expenses. 5) Estimated federal income tax savings from HSA contributions made in 2007 for a single taxpayer with income of $60,000, available at by clicking on Health Savings Accounts (HSAs).

3 Take charge of your health, your savings and your future The Wells Fargo HSA is backed by one of the largest and most highly recognized financial service companies in the nation and one of the first banks to offer HSAs. We go to great lengths to make the easy-touse Wells Fargo HSA work harder for you. Convenient payment options With a swipe of your Wells Fargo Visa HSA debit card you can pay for prescriptions, doctor visits, dental expenses and more. Funds will automatically be deducted from your HSA. If you don t have enough money in your HSA to pick up a prescription or pay with your card at the doctor s office, use another form of payment and reimburse yourself later. Simple Savings An easy way to save and grow the funds in your HSA is by asking your pharmacist to dispense generic FDA-approved versions of the drugs your doctor prescribes. They re safe, effective and typically cost 20% less. Flexible online funding In 2010, the maximum amount the IRS allows you to contribute to your HSA is $3,050 for single and $6,150 for family coverage but you don t have to contribute it as a lump sum. Check with your employer to see if you can contribute to your HSA through pretax payroll deductions. Or you can contribute directly to your HSA any time funds become available. It s entirely up to you but the more you contribute, the more you have available to pay for medical expenses on a tax favored basis. HSAs and your health Note: Whether you use your card or another form of payment, always keep a copy of your receipts for tax purposes. Easy account management tools The Wells Fargo Health Account Manager SM web portal makes managing your HSA fast and easy. Sign on any time of the day or night to view account activity, make online contributions, set up or change direct deposit accounts, and more. You can also call the number on the back of this brochure for immediate assistance during business hours. Research shows that people who choose HSA-compatible health plans take better care of their health and understand the importance of choosing healthier lifestyles and proactively making the right decisions for their wellness. 6 By staying physically fit, you can also improve your financial health. With fewer medical bills to pay, you can save or invest more of the funds you ve contributed to your HSA. Investment choices to meet your needs Once a minimum balance in your FDIC-insured cash account is met, you have the option to invest some or all of the additional contributions you make to your HSA. With six mutual fund investment options, ranging from conservative to aggressive, it s easy to find an option that matches your financial goals and investment style. 6) 2009 research conducted by DSS Research for the Independence Blue Cross (IBC) Office of Consumerism INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

4 An account that grows with you and helps you reach your financial goals Your HSA account and all the funds in it are yours, with balances carrying over year after year. Your HSA will grow with you, giving you the ability to spend, save and invest at your own pace. You can even use your HSA to pay for qualified medical expenses in retirement. Looking toward retirement in three different ways Here s how an HSA helped these families maximize their healthcare buying power and save for their healthcare expenses in retirement. The Hendersons, retiring in 30 years Amy and Joel Henderson are working parents, age 35, who plan to retire in They re contributing $6,150, the maximum a family can contribute in With two healthy young children, their annual out-of-pocket medical expenses are averaging just $1,000 per year. They decide to invest the amount remaining in their account each year for retirement. Mary, retiring in 20 years Single at age 45, Mary has no kids and high hopes for an active retirement. With $500 per year in out-of-pocket medical expenses, she plans to contribute the maximum of $3,050 to her HSA until she retires at age 65 in Ken & Kathy, retiring in 10 years With their children through college and only ten years left to save for retirement, Ken and Kathy are contributing the maximum each year, plus making $1,000 in catch-up contributions that the IRS allows for people in their age group each year. They re funding all their current medical expenses out of pocket to maximize the amount they can save and invest within their HSA. HSAs working for you in retirement The Kathy & Mary Hendersons 7 8 Ken 9 Year of retirement Annual HSA contribution $6,150 $3,050 $7,150 Annual out-of-pocket medical expenses $1,000 $500 $0 HSA contributions saved to use in retirement $154,500 $51,000 $71,500 HSA investment income until retirement $134,337 $24,934 $14,344 Total HSA tax savings at retirement $79,709 $21,484 $21,461 Total HSA balance in retirement $288,837 $75,934 $85,844 These examples are for illustrative purposes only. Individual situations may vary. HSA contribution amounts are based on 2010 contribution limits, which are subject to change annually by the IRS. These examples are not intended to imply or guarantee a specific investment return. Investment earnings will depend upon investment selection (4%) and length of investment time. Fees may reduce account earnings. Please consult your tax advisor regarding your individual situation. 7) Total HSA contributions saved to use in retirement: $6,150 annual HSA contribution - $1,000 annual qualified medical expenses = $5,150 X 30 years = $154,500. HSA investment income until retirement: $5,150 annual HSA contribution X 4% annual rate of return compounded annually for 30 years $154,500 total HSA contributions saved to use in retirement = $134,337. HSA tax savings at retirement: ($6,150 total HSA contributions X 30 years = $184,500 X 25% federal income tax rate for married couples filing jointly = $46,125) + ($134,337 total HSA investment income X 25% federal income tax rate for married coupled filing jointly = $33,584) = $79,709. HSA balance at retirement: $154,500 total HSA contributions saved to use in retirement + $134,337 HSA investment income until retirement = $288,837. 8) Total HSA contributions saved to use in retirement: $3,050 annual HSA contribution - $500 annual qualified medical expenses = $2,550 X 20 years = $51,000. HSA investment income until retirement: $2,550 annual HSA contribution X 4% annual rate of return compounded annually for 20 years $51,000 total HSA contributions saved to use in retirement = $24,934. Total HSA tax savings at retirement: ($3,050 annual HSA contributions X 20 years = $61,000 X 25% federal income tax rate for single taxpayer = $15,250) + ($24,934 total HSA investment income X 25% federal income tax rate for single taxpayer = $6,234) = $21,484. HSA balance at retirement: $51,000 HSA contributions saved to use in retirement + $24,934 HSA investment income until retirement = $75,934. 9) Total HSA contributions saved to use in retirement: $6,150 annual HSA contribution + $1,000 catch-up contribution X 10 years = $71,500. HSA investment income by age 65: $7,150 annual HSA contributions saved to use in retirement X 4% annual rate of return compounded annually for 10 years $71,500 HSA contributions saved to use in retirement = $14,344. Total HSA tax savings at retirement: ($7,150 annual HSA contributions X 10 years = $71,500 X 25% federal income tax rate for married couple filing jointly = $17,875) + ($14,344 total HSA investment income X 25% federal income tax rate for married couple filing jointly = $3,586) = $21,461. HSA balance at retirement: $71,500 total HSA contributions saved to use in retirement + $14,344 HSA investment income until retirement = $85,844. INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

5 Getting started is easy Once you re enrolled in an HSA-compatible health plan, it s easy to set up your Wells Fargo HSA. Simply follow the instructions specific to your employer s benefits enrollment process. Once your HSA is active, you ll receive a welcome packet in the mail giving you all the information you need to use and manage your account. Your Wells Fargo Visa HSA debit card will be mailed separately with instructions for easy set up and use. How can we help? We re here to answer any questions you have about your HSA. Give us a call or visit us online wellsfargo.com/hsa 2009 Wells Fargo Health Benefit Services, a division of Wells Fargo Bank, N.A. All rights reserved. Member FDIC.