Health savings accounts are like personal savings, except the money you put aside can only be used for health care expenses. The money is not taxed, and you can invest it in stocks, bonds, and mutual funds. Here's how to economize with one.
- Step 1: Make contributions to your account. In 2010, you could put up to $3,050 into the account if you were just covering yourself, and $6,150 if you were also covering your family. If you were over 55, you could make an extra $1,000 contribution. Such are the perks of age.
- FACT: A 2008 study by the U. S. Government Accountability Office found that the average adjusted gross household income for taxpayers between 19 and 64 years of age who reported using a health savings account was about $139,000, as opposed to $57,000 for all other filers.
- Step 2: Set up a health savings account at a bank. Be aware that banks may charge fees on these accounts.
- TIP: High-deductible plans usually have cheaper premiums. Health savings accounts let you pay for medical costs before they reach your deductible.
- Step 3: Sign up for a high-deductible insurance plan. In 2010, you could only open a health savings account if you had health insurance with a deductible of at least $1,200 for individual coverage and $2,400 for a family.
- Step 4: Consider your anticipated medical expenses, your financial situation, and the amount of control you want over your health care spending. If you are healthy and want to set money aside for future health care expenses, a health savings account may make sense. But if you expect to need expensive medical care in the coming year, it might not be a good idea.