What is a Health Savings Account (HSA)?


With the steep cost increases for medical insurance, many employers are passing on the cost increases to their employees. In many cases employees are increasing the deductibles on group medical insurance plans; the same trend is also affecting self employed individuals. With the increased deductibles, employees are now faced with higher out-of-pocket medical costs. If you are an employee faced with this predicament, you should be looking at a 'Health Savings Account' (HSA). 

An HSA is a tax-exempt trust, and while the primary purpose of the trust is to pay qualified medical expenses of the beneficiary, the trust can also act as a retirement account. Funds not used to pay medical expenses can be invested in stocks, securities and other income bearing investments and grow tax free. Similar to IRAs, financial institutions including banks, stock brokers, and mutual funds can offer an HSA plan. Therefore, you are not limited to the plan offered by your medical insurance carrier. Unlike, an IRA, there are no limitations on your tax deduction to your HSA assuming that you have high income. Your contribution to your HSA is fully deductible, regardless of your income.

HSA Table of Contents

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