Health Savings Acounts - What You Should Know!
Maybe it took the State of The Union address from President Bush
to bring the concept of Health Savings Accounts out into the
open for all to see. Whatever the case, this is an idea and
reality that is long overdue and a great solution to health
insurance for many people. Health savings accounts, coupled with
a companion low-cost high-deductible health care insurance plan,
will take the bite out of monthly health care costs for many
consumers, and provide a powerful savings component at the same
time. Let's look at the details.
While Congress passed the legislation creating Health Savings
Accounts in 2003, it has taken a while for the word to get out.
In a nutshell, the deal is as follows: Health savings accounts
are tax-free savings accounts, which are necessarily paired with
a high-deductible insurance policy for catastrophic medical
expenses. You are able to put as much as $5150 (family) or $2600
(individual) annually into these accounts, which are in turn
used to cover normal and customary medical expenses, like
doctor's visits, routine checkups, etc. Some of the neat things
about these accounts, besides the tax-free part, are that you
may carry over unspent money from year to year, and it does not
matter where you work or for whom. They are completely portable.
Also in most cases, it's very possible to realize large savings
on your yearly insurance and medical expenditures. When you are
in charge of how much you spend and where, the possibilities are
eye-opening. Plus, you are not tied to any plan's particular
doctor or medical group: you are free to choose whoever you
want. Health savings accounts, when set up properly, can not
only save you lots of meony, but also cannot be cancelled except
by you.
Another enticing option regarding health savings account is the
savings aspect. If you have a traditional IRA or 401(k) you get
a deduction for all contribututions made yearly, but after age
65 all distributions are taxed at both the federal and state
level, including capital gains. (Roth IRA's don't apply) With a
Health savings account you get the same benefits as with IRA's
and 401(k)'s, with the major difference being that monies
withdrawn for qualified medical expenses are NEVER taxed! Also,
with health savings accounts there is no age restriction on when
you may withdraw funds like there are with the others. As far as
using these funds for retirement purposes, health savings
accounts are able to be withdrawn after age 65 for any purpose,
without penalty, though in this case you would pay income taxes.
This looks even better when you realize that account
appreciation on health savings acounts is tax-free, and look
even better for those who are self-employed, who may write off
100% of health care premiums. So in effect, you are buying a
high- deductible insurance plan, paying the premiums from your
business, and savings oodles of cash tax-free in your Health
savings account. Of course, should you become sick, you'll not
only have the ability to pay for your care, a major illness
won't be the family-finance disaster it often is these days.
More than 1 million Americans each year end up in medical
bankruptcy becasue of inadequate coverage. Don't let this happen
to you!
Health Savings Accounts are a train long overdue finally
arriving at the station. Make sure to climb onboard!