Q. What is a Health Savings Account?

                                                                                                                           

A Health Savings Account (HSA) is a special savings and investment account designed to be used only in conjunction with qualifying high-deductible health insurance plans. An HSA is like a personal savings accounts, but the money in it is used to pay for health care expenses. You — not your employer or insurance company — own and control the money in your HSA. 

Qualifying health plans for an HSA typically come with lower monthly premiums, which can make them attractive to many consumers but often have higher annual deductibles. If you have an HSA-eligible health insurance plan, you can open an HSA and make deposits to it on a tax-advantaged basis up to an annual limit established by the Internal Revenue Service (IRS). 

Here are some potential advantages of having an HSA:

·         You decide how much money to set aside for health care costs.

·         You control how your HSA money is spent.

·         Your employer may contribute to your HSA, but you own the account and the money is yours even if you change jobs.

·         Any unused money at the end of the year rolls over (stays in your account) to the next year.

·         You don't pay taxes on money going into your HSA.

·         You don’t pay taxes on money you withdraw from your account as long as those funds are used to pay for qualifying medical expenses.

Like any health care option, you should weigh your options when deciding if an HSA is right for you. Think about your budget, what health care you're likely to need in the next year and how you might want to save for future health care expenses. Also, if you're near retirement, an HSA may make sense because the money can be used to offset costs of medical care after retirement.

For more information about HSAs and other tax-favored health accounts and arrangements, click here.