6 Great Things About Health Savings Accounts

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If you are enrolled in a high deductible health plan, a health savings account can save you a lot of money. Learn the ins and outs of this tax-free account.

If you have a high deductible health plan but haven't opened a health savings account (HSA), you're missing out on some major benefits. Here are six of the most important.

  1. They're easy to use. There's not a lot of hassle to withdrawing funds. The money's yours, after all, and you can use it any time you like. You'll usually even get a checkbook and debit card to make things easier. Try to be frugal, though. When you withdraw from an HSA account, you cut into its interest-bearing potential. You could be giving up thousands of dollars in long-term investments.
  2. They're permanent. Unlike a flexible spending account (FSA), you don't have to spend the entire balance every year. The money keeps rolling over. There are limits to how much you can deposit each year, though - for 2009 they are $3,000 if you're single and $5,950 if you have dependents. Try to match those amounts every year and you'll soon be sitting on a nest egg.
  3. They're tax-free. The government actually wants you to set aside money for your own health care. That's why it set up the HSA in the first place. Not only are your deposits deductible from your total taxable income, but the money you withdraw for medical reasons is also tax-free. If you use it for anything else, though, be prepared to pay a penalty. Try not to do that. Wait until you reach 65, when the law allows you to use it anyway you like. You will have to pay income tax on the money you withdraw for nonmedical expenses but you will no longer have to pay the 10 percent penalty.
  4. They're flexible. Under federal law, there are a wide range of legitimate uses. These include:
    • Doctor visits
    • Special treatments and surgeries
    • Medical equipment, such as crutches or a knee brace
    • Dependent care
    • Optometry and dental work
    • Prescription and over-the-counter medications
    • COBRA premiums
  5. They're portable. Your HSA stays with you when you change jobs, retire or get laid off. The money you invest is yours to keep, as is the interest it accrues. Just remember, though, you won't be able to make any further deposits after age 65. So be sure to build up the maximum amount beforehand.
  6. They're profitable. If you can get in early enough and make the maximum deposits each year, you could build up quite a nest egg by the time you retire. At 8 percent annually compounded return, you could end up Super Kamagra with more than $500,000 in the account. If you can avoid dipping into it, the money really adds up. So why not get started today? You can have something exciting to look forward to.