insurance

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.

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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