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April 14, 2011
Health Savings Accounts Help You Control Your Health Care Costs
With Health Savings Accounts, people can become more proactive when it comes to making their own health care choices. An HSA plan allows you to contribute money to a savings account that earns tax-free interest. Then, you can tap that money for future medical expenses and the withdrawals are also tax-free as long as you buy a type of health care that is qualified to work with an HSA. That list is pretty long and includes many services that traditional health insurance doesn't cover, like dental care.
Before you can start an HSA, you must have a high-deductible health plan and not just any plan will do. Be sure to get a plan that is qualified to be combined with an HSA. These two always go hand-in-hand. As of 2011, high-deductible plans must have a minimum deductible of $1,200 for individual coverage or $2,400 for family coverage to be used in combination with an HSA.
The maximum yearly HSA contribution allowed is up to $3,050 for an individual HSA plan and $6,150 for a family HSA plan for both 2010 and 2011. If you are 55 or older, you can deposit an additional $1,000 every year in what are known as "catch up" contributions.
Once you turn 65, HSA withdrawals can be made for any purpose. Until then, though, you'll have a 20 percent penalty for using HSA funds for anything other than qualified health care. Any funds you don't need for health care just roll over from year to year and continue to grow quickly with tax-free earnings. That makes an HSA very similar to IRAs. You can learn more about how much you could save with your own HSA right here on our website.
Posted by Wiley Long at April 14, 2011 09:24 AM