Health Savings Accounts 101 for families


By Lela Davidson

New health insurance plans offered by many employers come with a high deductible but a lower premium. And if you've got a high deductible, you are probably eligible to use a tax-preferred Health Savings Account, which could help you accumulate a healthy stash of cash for medical expenses later in life.

HSAs are personal financial accounts used to pay for medical, dental, vision and prescription expenses with pre-tax dollars. This saves payroll and income taxes up front. Over time, earnings on the money in an HSA grow tax free, just like a 401(k).

Some high-deductible plans require the consumer to pay everything up to the deductible. Others cover preventative benefits, like well-child, annual adult exams and cancer screenings, with no out-of-pocket payments. Large expenses, such as lengthy hospital stays or specialized treatment, are still covered. And because you pay more of your own costs, the premium is lower.

Inside an HSA, those savings can grow to pay for medical expenses in the future or to supplement retirement funding.

An HSA is yours regardless of a change of employer. If you want to get the most from your HSA, you can contribute the maximum allowed each year. There is no "use it or lose it" rule for HSAs, so contributions not withdrawn may be rolled over. If you switch to a lower deductible insurance plan, the money still is yours and continues to grow tax-free. The entire balance can be withdrawn at age 65 without penalty.


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