Consider a Health Savings Account
If you have a high-deductible health plan (HDHP), you may want to find out if your employer offers a Health Savings Account (HSA).
An HSA is a tax-advantaged savings account that gives you the option to save money, invest it, or spend it for qualified medical expenses – all tax-free. To open an HSA, all you need is a HSA-compatible HDHP.
HSAs have many advantages:
- You decide how much from each paycheck to contribute (up to annual limits set by the IRS).
- When you make take money out to pay for qualified medical expenses, the withdrawals are tax-free.
- You own the money in your HSA, and funds roll over automatically each year.
- The money in your HSA is yours for life, even if you change jobs, switch plans or retire.
Investing your HSA
Depending on your plan rules, you can keep the money in your account as cash savings or invest all or some of it. (Note: Most HSAs have a minimum cash requirement before you can invest your money.) The interest or investment gains your money earns is also tax-free!
Qualified medical expenses
Here are some examples of what the IRS determines to be “qualified medical expenses.” For a full list, visit the IRS website here.
- Health plan premiums, deductibles and copays
- Eye exams, glasses and contact lenses
- Medical equipment and supplies
- Hearing aids; prescription drugs
- X-rays and lab fees
- Psychiatric care; therapy
Ask your health plan administrator or HR department to see if you are eligible to open and contribute to an HSA. HSAs offer many financial and health benefits that can really help you maximize your healthcare savings.