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Finances in 55: Is an HSA Right for You
Posted By Miranda On 09/19/2011 @ 12:11 pm In Health Care | 5 Comments
One of the most interesting health care financial products to be introduced in recent years is the Health Savings Account (HSA). A HSA can be a way for you to have more control over your health care dollars, while at the same time providing you with a way to reduce health insurance  premium costs and gain a tax advantage. I recently opened a HSA, and I am quite happy with the results.
Before we tackle the question of whether or not a HSA is right for you, let’s take a brief look at how it works. A HSA works a lot like a traditional IRA . You put pre-tax dollars into the account (there are yearly contribution limits), and it grows on your behalf (although you usually don’t get to choose investments, and the interest earned is more on par with a high yield savings account in many cases). In fact, once you reach the age of 59 1/2 you can withdraw money from the HSA with the same rules, paying income taxes on money that isn’t used for health related expenses.
As long as you withdraw money for health care related expenses, the money in your HSA  grows tax free, and you can withdraw it at any time. If you withdraw the money for something else, you will have to pay income tax, and a 10% penalty if you aren’t 59 1/2.
The main caveat to the HSA is that you have to be enrolled in a qualified high deductible health plan. This means that you will see lower monthly premiums, but you will have to pay more of your expenses out of pocket, until the higher deductible is met.
The fact of the matter is that a HSA isn’t right for everyone. Before you decide to enroll in the high deductible plan, take 55 seconds to think over your situation:
My family of three rarely sees the doctor beyond yearly preventative visits, and our prescriptions are limited. As a result, paying out of pocket isn’t that onerous to use — we never met our deductible anyway. With a HSA, we pay half what we did before in premiums, and put the difference in the HSA each month. Our costs haven’t gone down, but because the money in the HSA is ours, it is under our control, and we can use it for co-pays and out of pocket expenses — and it grows on our behalf.
A HSA has worked well for us, but it might not be the best for you. If you regularly meet your deductible, and if you have a chronic condition or make a lot of health care visits, you might be better off with the plan you already have.
(Photo: Cliph )
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 health insurance: http://www.bargaineering.com/articles/find-affordable-self-employed-health-insurance.html
 traditional IRA: http://www.bargaineering.com/articles/the-ever-unpopular-traditional-iras.html
 HSA: http://www.bargaineering.com/articles/hsa-hra-and-fsa-differences.html
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