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How to Make the Most of a Health Savings Account

An HSA offers several tax benefits you can take advantage of.

Higher health insurance deductibles have a silver lining: You can contribute to a health savings account. To qualify, you must have an HSA-eligible health insurance policy with a deductible of at least $1,350 for individual coverage or $2,700 for family coverage -- whether you get insurance through your employer or on your own. You can contribute up to $3,500 to an HSA in 2019 if you have individual coverage and up to $7,000 if you have family coverage, plus an extra $1,000 if you're 55 or older.

This powerful account provides a triple tax benefit: Your contributions are tax-deductible (or pretax if made through your employer), your money grows tax-deferred, and you can use the money tax-free to pay deductibles, co-payments, prescription drug costs, out-of-pocket dental and vision costs, and other eligible expenses.

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You can't contribute to an HSA after you're on Medicare, but you can use money in the account to pay premiums for Medicare Part B, Part D and Medicare Advantage (but not medigap) after age 65. You can even withdraw money tax-free from the account to reimburse yourself for Medicare premiums that are paid automatically from your Social Security benefits.

Lori Verni-Fogarsi, 47, an author in Holly Springs, N.C., and her husband, Mark Fogarsi, 56, have been contributing to an HSA for years, and Fogarsi's former employer contributed about $2,000 to the account each year. They have maxed out their contributions to other tax-advantaged retirement accounts and use the HSA to supplement their savings. "I usually pay cash for the out-of-pocket costs instead of using the HSA so we can leave it in there to grow," Verni-Fogarsi says.

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