4.6 Health Savings Accounts, known as HSA\'s, are permitted by the IRS to allow

Question

4.6 Health Savings Accounts, known as HSA's, are permitted by the IRS to allow individuals to invest tax deductible amounts now that are also excluded from being taxed again on any of the capital gains. If an engineer invests the maximum allowable amount of $3,500 now, and amounts increasing by $50 per year for the next 39 years, how much money will be held in the account immediately after the last deposit, if the account earns 6% per year? b) Based on this total accumulation in the HSA, calculate the first years amount that can be withdrawn Air? if n-20 years to cover the engineers health-related expenses, and the account continues to earn i-6 interest, but these expenses also increase by g-6% per year during the same period.

Explanation / Answer

Answer a:

The investor's current investment = $ 3500

Every year amount increased by $50

The earning grows by 6% per annum

Total number of period = 39 years

By using FV formula in excel, FV (Rate, nper,Pmt,PV)

we can calculate the total accumulation = $ 41215.20

Answer 2:

Since we dont have any information about the expenses, we cannot calculate how much amount can be withdrawn in the first year.

Present value 3500 Rate 6% Nper 39 Yearly payment 50 Future Value 41215.20

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