Thursday, February 16, 2012

Health Savings Accounts - Why I LOVE Them

A Health Savings Account is kind of like an IRA, but for health care.  They go hand-in-hand with health insurance coverage that has a high-deductible.  For our family that deductible is $7,000 a year.  What does that mean?  First, we pay our carrier (WPS) $350/month in premium.  Second, we pay the first $7,000 in health care costs.  After that, our insurance pays 100%.  Third, we use money we put in our HSA to pay those out-of-pocket expenses.

When I've heard HSAs criticized in the media it is usually saying they are vehicles for the "rich".  I am not the rich.  I am a professional however.  But more importantly, I am frugal.  And so is my husband.  He had an HSA when we got married, and was nearly giddy when, upon saying "I do" we were able to double the amount of money we stored in our HSA.

Unlike a Flex Spending Plan, money deposited into an HSA does not go away at the end of the year.  We put money in, and receive both a state and federal tax break.  The money grows tax free.  And, if used for health cares costs (excluding insurance premiums), comes out tax free.   And, after retirement age, it can be taken out for anything, tax free. Recognizing the advantages of minimal taxes we built ours up as much as possible and then did not use the balance until after our first child was born.

This year the first item on our savings check list was to max out the HSA contribution.  It's February, and we've met our goal.  I know that HSAs do not fit everyone's life, but nothing does.  If you are self-employed, a business owner, a natural saver, or don't have a lot of health expenses at the moment, I encourage you to learn more about HSAs and high-deductible health insurance.  Thanks to these vehicles, we have saved thousands of dollars.  And gained quite a bit of control over our health care costs.
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