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Health Savings Account (HSA)

Health Savings Account

A “Healthy” Investment Option

Looking for a way to pay less taxes and save more money? A Health Savings Account (HSA) might be a viable option for you. You can make pre-tax contributions, and the earnings on the account are tax-free. You can pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. Individuals age 55 and older are allowed to make additional catch-up contributions to their HSAs, but once an individual reaches age 65 or enrolls in Medicare they are no longer eligible to contribute to their HSA.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 authorized HSAs in 2004. This savings vehicle helps conscientious people to save for medical expenses and build wealth for health care in old age.
In order to qualify for an HSA contribution, you:

  • Must have a high deductible health plan
  • Must have no other health coverage except what is permitted
  • Cannot be enrolled in Medicare

Your HSA can pay for qualified medical expenses without preauthorization and can cover additional needs such as dental, vision, orthodontics and over-the-counter medicine. There is no “use it or lose it” restriction on an HSA—unused contributions continue to earn and the HSA continues to grow.

The maximum allowable contribution for a single person is $3,000 in 2009 and $5,950 for a family in 2009. Contributors who have passed the age of 55 years can contribute an additional $1,000 in 2009.

Is an HSA right for you? 

Consider the advantages: your contributions are deductible, the investment gains are tax-free and withdrawals used for medical expenses are tax-free. Consult your tax advisor to determine if an HSA should be a part of your retirement portfolio.