HSAs – a brief overview

Back in 2004, President Bush introduced Health Savings Accounts (HSA).  Only individuals or families covered under a high-deductible health insurance plan during the year are eligible to contribute to an HSA.  There are minimum annual deductible amounts in order to qualify as a high-deductible plan. So if you haven’t boned up on HSAs yet, here are a few factoids for you: 

• Money contributed into an HSA is tax-deductible.  Either you contribute into an HSA on your own, or your employer contributes on your behalf.
• Money invested within the HSA is your money and grows tax-deferred.  Unlike Flexible Spending Accounts (FSA) offered to you as part of your employee benefit package where you set aside a set amount of money to pay for your family's healthcare costs with pre-tax dollars, there is no "use it or lose it" pitfall with HSAs.
• Money can be withdrawn tax-free from your HSA at any time to pay for your family's healthcare expenses.
• Any money remaining in your HSA upon your reaching the age of 65 is available to subsidize your retirement.

For more information about HSAs, check out IRS Publication 969.