Articles - Archived Money Matters

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Health Savings Accounts

Want to build a second retirement account? Consider investing in a Health Savings Account (HSA). This is a tax-deductible savings account with tax-free withdrawals when the money is used exclusively for paying for or reimbursing qualified medical expenses.

    You can open an HSA provided you are:
  • Covered under a qualifying high-deductible health insurance plan
  • Not enrolled in Medicare
  • Unable to be claimed as a dependent on another person’s tax return
  • Less than 65 years old

What is a High Deductible Health Plan?

It is a medical insurance plan that has a deductible of at least $1,150 for self-coverage, with a maximum out-of-pocket cap of $5,800. For family coverage, the deductible is at least $2,300, with a maximum out-of-pocket cap of $11,600.
Note: These 2009 amounts are adjusted annually for inflation.

Contributions for the current year can be made until April 15 of the following year. If you are 55 or older, you can take advantage of the catch-up provision to maximize contributions.

The maximum contribution limit for 2009 is:
Single Coverage - $3,000
Family Coverage - $5,950
Catch-up Provision - $1,000

Any money deposited into an HSA is 100 percent tax-deductible and the money grows tax-deferred just like an IRA to dramatically increase your return.
Contributions should not affect IRA limits.

    Advantages:

  • Withdrawals for medical expenses are tax-free and distributions can be made anytime before or after age 65. Again, HSAs can be one of the best avenues to pay for medical expenses during retirement.
  • Health insurance costs may be lowered by contributing to an HSA.
  • HSAs are self directed. You have almost total control over where funds are invested, which means you can build a substantial amount of wealth over time.

Consider opening an HSA today!

Note: These 2009 amounts are adjusted annually for inflation. For updated limits, visit www.irs.gov.