I’m not saying this to brag about my health (Actually, with free preventative care, it’s pretty careless to not get a physical once a year). This behavior, of not using your health insurance, is fairly typical of people in their 20’s.
There is one advantage to being in this situation, besides the obvious — depending on your coverage; you may be eligible to open a Health Savings Account (aka HSA).
I’m amazed at how many taxpayers qualify to contribute to a Health Savings Account but don’t. There are many benefits for doing so.
The purpose of this post is to give a brief introduction to Health Savings Account, followed by a list of HSA allowable expenses in 2011
An Overview of Health Savings Accounts (HSAs)
A HSA is a unique savings account, used along with a high deductible health plan. A HSA is similar to a Traditional IRA. Contributions to a HSA are tax-deductible and withdrawals are tax-free, as long as the withdrawal is used for a HSA approved expenses.
To contribute to a HSA, you’re required to have a high deductible health plan.
Health Savings Account Contribution Limits
In 2011 the contribution limits, minimums, and maximums for opening an account are:
- Minimum deductible to qualify = $1,200
- Maximum out of pocket = $5,950
- Contribution Limit = $3,050
- Age 55 and over = $1,000
- Minimum deductible to qualify = $2,400
- Maximum out of pocket = $11,900
- Contribution Limit = $6,150
- Age 55 and over = $1,000
Benefits of Health Savings Accounts
What’s unique about HSAs, are that if contributions are not withdrawn, your money grows tax-deferred. Therefore, if you maintain good health and thus pay little medical expenses each year, a HSA is another way to save for retirement because whatever money left in your account at age 65, can be withdrawn penalty free, similar to a Traditional IRA.
Even better, there are no income limits for HSAs. For those ineligible to contribute to am IRA due to income, they can still contribute to a HSA.
HSA Approved Expenses for 2011
Below are some examples of approved expenses for HSAs. I tried to pick out what was relevant for Gen Y. There are a lot more eligible expenses, which you can find in the link below:
- Alcoholism treatment
- Ambulance services
- Birth control pills
- Contact lenses
- Dental treatment
- Eye surgery (including Lasik)
- Fertility enhancement
- Lactation assistance supplies
- Therapy or counseling
For a more complete list, click here.
If you think of opening a HSA may be to your advantage, below are two resources to check out.
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Photo by: Gwire