I was talking to a friend of mine the other day and the conversation turned to Health Savings Accounts (because we’re cool like that).
An HSA is a savings account that is never hit by income tax as long as the money is used for qualified medical expenses. The money can be saved year over year and used when needed (unlike an FSA which must be spent by the end of the year). The catch is that you are only eligible for an HSA if you have a high deductible health insurance plan.
If you are in the 25% tax bracket, that means you get an immediate 25% return on your “investment” by just earmarking money for health expenses.
My friend is getting married soon and he was wondering if he could use money in his HSA to pay for medical expenses for his spouse once they are married, even if she is on a low deductible plan and not eligible for an HSA herself.
Combine Low and High Deductible Health Plans to Save Money
Both my friend and his future wife have health insurance through their companies. He has a high deductible plan with an HSA, she has a regular low deductible plan.
Legally he CAN use his HSA dollars to pay for any medical bills she incurs (he could also use the HSA for kids if they had any). That means his wife essentially has a low deductible health insurance plan with an HSA along with it. That’s pretty sweet!
Another way to have a low deductible plan with an HSA is to save up a bunch of money in your HSA over your healthy years. Single people can save a maximum of $3,100 a year in their HSA, while if you have a family plan you can save $6,250 a year (those limits will rise in 2013 to $3,250 and $6,450). If you can save in your HSA for about five years without needing to use any of the money in those accounts, you could have anywhere from $15,500 to $31,250 in your HSA.
At that point you could just switch to a low deductible health insurance plan and use the money saved up in your HSA to pay for any medical treatment.
Pro-Tip: While you are young and healthy, get a high deductible health plan max out your HSA. You’ll save money on premiums and build up a nice financial safety net for medical expenses.
Readers: Do you have an HSA?
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