I keep hearing more and more about Health Savings Accounts (HSAs). Is there perhaps a quick rule of thumb one can use to know whether it's worth investigating the value of an HSA for a particular individual or family?

An HSA is a Health Savings Account, issued by a financial institution like a bank. You can only open one if you have a High Deductible Health Plan (HDHP) that is HSA qualified.

Why might you want an HSA? Because it is a lot like an Individual Retirement Account (IRA). You can put tax-free money into the account, subject to annual limits. You can then take money out of the account tax-free if you spend it on eligible medical expenses as defined by the IRS. Eligible expenses are very broad compared to what typical health plans provide and include things like chiropractic and acupuncture. Any money that you don't spend in a calendar year *stays* in the account, and accumulates until you are 65. You can continue to use the funds for medical expenses tax free, or access the money for other purposes and pay normal income taxes on the withdrawal, plus a 10% penalty if you're under 65. Any earnings, interest or investment dividends, accumulate tax-deferred, too!

If you have an HDHP that is HSA qualified, then you may already have an HSA . Many times an insurer will work with a financial company to create an HSA at the same time that you buy an HDHP. You can change the HSA account, and shop around for HSA's from banks and investment companies at places like www.BankRate.com.

If you don't have an HDHP, you can buy one as individual insurance, or ask your employer to offer one.

Your tax benefit will depend on how much tax you currently pay. You'll need the maximum amount you can contribute (~$2,500+/individual ~5,600+/family) and the tax rate you pay. So for example, a family in the 25% tax bracket might save $1,400 (~$5,600 x 25%) in a year on taxes by contributing to an HSA account.

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It really depends on how much risk you are willing to take and if you can afford it. If you are able to have enough money in your bank account to cover the risk (out of pocket maximum) then yes this is for you.

You must be willing to put the money saved into an account so that it also covers the risk. This one will grow at a small percentage but can be spent tax free on medical expenses

Chad Levin