Health Savings Account Blog

Unlike Flexible Spending Accounts, the money in your HSA rolls over every year. You don't have to spend the entire balance and the remainder can grow into a retirement fund.

There is a limit to how much you can deposit into your Health Savings Account each year, though. For 2012, it’s $3,100 if you’re single and $6,250 if you have dependents. Exceeding these limits could get you an IRS penalty.

Next, HSA plans give you tax advantages. The contribution you place in your account can be deducted from your total taxable income. Aside from that, the money you withdraw for qualified medical expenses is also tax-free.

Using your HSA funds for other purposes could mean incurring a 20-percent tax penalty. However, if you wait until you reach 65, you can use the funds any way you like. You'll still have to pay income tax on money used for nonmedical expenses, but there won't be any penalties.

Fourth, Health Savings Accounts are very flexible. You can use them for doctor visits, dental and vision services, special treatments, surgery, and a lot more. You can even use your HSA funds to buy over-the-counter medications as long as you get a prescription from your doctor.

Fifth, HSA plans are portable. The money is yours to keep even if you change jobs, retire, or lose your job. Just remember that you won't be able to make any further deposits after age 65. So be sure to build up the maximum amount before then.

Last, they are profitable. If you start an HSA early and make the maximum deposits each year, you could build up quite a nest egg by the time you reach 65. And, because some of the money you deposit can be invested in other ways, health savings accounts offer the potential for building wealth.