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    Health Savings Accounts (HSAs)

    June 2008 | Filed under Health Topics, Women's Health Issues

    Although HSAs have been around for many years they have become more popular in the last 2 years.  HSAs were once known as Archer MSAs. The IRS allows a person to write off their deductible exposure on their taxes by setting up a savings account that is equals their deductible. This is optional and the member sets aside their own money. Since health insurance costs have been steadily increasing, the public is more receptive to purchasing high deductible health plans.

    For a health savings account to work, you need to have a high deductible health plan (HDHP). HDHPs generally have deductibles of at least $1,000 for individuals and $2,500 for families. In essence, the HDHP really only covers catastrophic care. In exchange for the high deductibles, you get lower premiums. You take the money you are saving on your premiums and deposit it on a pre-tax basis into an HSA.

    While HSAs are supposed to be helping middle-income families, some would argue that  HSAs are just a tax shelter for wealthy Americans. That’s because they can be used as an alternative retirement and estate tax planning tool for individuals who have maxed out the limits on their existing retirement plans.

    The Institute of Health Freedom breaks down the Pros and Cons of Health Savings Accounts:

    “In the best case you accumulate money in the account for health treatments considered deductible by the IRS and for services not covered by Medicare. (Seniors most likely won’t be able to use the money for Medicare-covered services.)

    In the worst case, you accumulate money and upon retirement decide to use it on services not considered qualified deductible medical expenses by the IRS. In that situation, you would pay taxes on the HSA money (but no 10 percent withdrawal penalty if you are over age 65) and then use it to pay for those services.”

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