For those familiar with Flexible Spending Accounts (FSA), HSAs are similar but have one major advantage. An HSA is not a “use it or lose it” account like a FSA. So if you set money aside in a year that does not get spent, you can carry that balance year-over-year until it is used. That carried over balance can be self-directed similar to any other self-directed retirement account to save for any future years medical costs, regardless of your age at the time of withdrawal. HSAs are ideal for younger individuals and families that don’t expect to have large annual medical expenses. They are also ideal for the self-employed.
HSAs are an excellent way to pay for current medical expenses with tax free money, reducing your current taxable amount AND helping to save for one of retirements greatest burdens, medical expenditures. You should consider an HSA if:
- You have a high-deductible health plan.
- You are generally not covered by any health plan that is not a high- deductible plan.
- You are not enrolled in Medicare.
- You may not be claimed as a dependent on another person’s tax return.
Contributions to an HSA for 2010 are as follows:
- $3,050 for a Individual Coverage
- $6,150 for a Family Plan
- $1,000 catch up for eligible individuals 55 and over.
While HDHPs have higher out-of-pocket limits, they also cost much less in annual premiums. So instead of having a $500 monthly insurance premium with a standard health care plan, you may have a $250 premium with a HDHP then make a $250 contribution to your HSA. Any portion of the $3,000 you contributed in that year that goes unused can be saved and/or invested within your HSA. And again, the HSA contributions are tax free.
Contact us to learn more about how a self-directed HSA can benefit you.