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
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so contributions not withdrawn may be rolled over.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 The entire balance can be withdrawn at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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