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November 2008 Managing Health Care Costs Series
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by Judy Cziprian, CSA |
| One of the reasons a health savings
account (HSA) may be seen as a cost-effective solution is that some of the
potential savings are reflected in tax advantages. Like an IRA,
contributions made to the savings account of an HSA are tax deductible.
Savings are invested and any earnings accumulated in the account are tax
deferred. At the time distributions are received from the HSA to pay for
qualified medical expenses, no tax is due from the amount withdrawn.
The savings component is designed, first and foremost, to help pay for out-of-pocket expenses, such as deductibles, that are incurred each year. But one of the most appealing aspects of HSAs is that money set aside in the savings account does not have to be used in the current year, unlike typical health care flexible spending accounts (FSAs). Unused dollars and earnings continue to accumulate in the account for as long as you live and can be used to meet qualifying medical expenses later in life. This can even include premiums to pay for long-term care insurance. As a result, HSAs can play a role in helping you build a "health care nest egg" to help pay for medical costs later in life, including retirement. Just as with IRAs, there are annual limits on how much can be contributed to an HSA. In 2008, the maximum amount allowed is $2,900 for an individual and $5,800 for a family. That money can be contributed anytime between the first day of the year and April 15 of the following year (the tax filing deadline), also like an IRA. Disclaimer: click here to read more |
Judy Cziprian
Financial Advisor Certified Senior Advisor Ameriprise Financial Services, Inc. |
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