 |
| Another Option to Save on Medical Costs |
|
| OVERVIEW: HEALTH SAVINGS ACCOUNTS The Medicare drug-benefit law passed in December also introduced Health Savings Accounts, another tax-advantaged way for Americans to save for health-care costs -- or even their retirement. HSAs allow people with no health insurance, or those who have policies with high deductibles, to deposit and withdraw funds tax-free, as long as the money is used for qualified medical expenses. And unlike Flexible Spending Accounts, if you don't spend all your contributions in one year the money rolls over to the following year. And if you hold on to the account long enough, though, you can withdraw the funds for any reason without incurring any penalty. Since these plans are so new, few insurers are offering the accounts and depending on the state in which you live, it may be difficult to open a HSA. Many states have complex insurance laws that prevent insurers from offering the accounts. --By Terri Cullen, The Wall Street Journal | ADAI can show you the best program to fit your needs. | 20s thru 30s Couples with young children and big medical expenses should stick with low-deductible health-care plans. But HSAs make a lot of sense for young single workers who carry little or no health-care insurance. If you have insurance, to qualify for an HSA, you have to forgo a low-deductible comprehensive health-insurance coverage and enroll in a plan with a high deductible (at least $1,000 for individuals, $2,000 for families) and a high cap on annual out-of-pocket expenses ($5,000 for individuals, $10,000 for families). High-deductible insurance policies -- so called catastrophic health-care coverage -- typically to cost up to 40% less than policies with lower deductibles, and with HSAs, and you can contribute up to $5,150 a year for a family, tax-free or $2,600 for singles into the tax-free accounts. Withdrawals can be made to pay for qualified medical expenses, including such things as crutches and contact lenses. Families struggling to conceive a child can also use the funds to pay for fertility-enhancement treatments. You can't, however, use the money in the account to pay for your own health-care insurance premiums. Also, if you opened an account through your employer and then switch jobs, the account comes with you. | ADAI can show you the best program to fit your needs. | 40s thru 50s Married couples with children often have some type of low-deductible health-insurance coverage and a flexible-spending account. through their jobs. So, if you're covered by your employer's group health plan, you're out of luck. But if the kids have left the nest it pays to run the numbers to see whether high-deductible coverage may make more sense, especially if your employer makes you pay part or all of your group insurance premiums. If you manage your health-care spending wisely, shouldering more out-of-pocket expenses in return for a lower premium and tax-deferred growth could be a better deal for you. Because the accounts act like the equivalent of an IRA -- contributions are tax deductible and are permitted to grow tax-deferred until you withdraw them in retirement -- HSAs can act as a sort of back-door retirement-savings account. Families can contribute up to $5,150 a year, tax-free ($2,600 for singles). If you're over 55, you can make an additional contribution of $500. Like IRAs, the withdrawals for non-qualified expenses are subject to income tax and you'll be hit with a 10% penalty if you withdraw the contributions for non-qualified expenses or before you hit 65. |
ADAI can show you the best program to fit your needs. | 60s+ Like young families, seniors tend to have pricey, ongoing medical expenses, which make HSAs a bad option if you're already covered by a low-deductible health insurance plan. But if you have no health insurance, or your plan has a very high deductible, HSAs may be worth looking into. Though you can't fund an HSA at age 65 and over, persons aged 60 through 64 can stash away cash now in a HSA and use the proceeds to help pay for costs like prescription drugs and dentures. And, in addition to the annual contribution limit (see 40s and 50s), people between the ages of 55 and 64 can make an additional annual contribution of $500. So if you just turned 60 and you're not covered by a low-deductible plan, the clock is ticking so start shopping plans now. Contributions and earnings from an HSAs can be withdrawn at any time tax-free to pay for medical expenses, but after age 65 you can withdraw funds to pay for non-medical expenses and not be hit with the 10% penalty. You will, however, have to pay taxes on the withdrawal. When the account holder dies, the money can be transferred to a spouse tax-free, or to someone else as a taxable inheritance. ADAI can show you the best program to fit your needs. Call 877-576-8358 |
