An HSA (Health Savings Account) works like an IRA. You deposit money tax-free and it grows tax-free until you use it. It’s your money, no matter what! And, you decide how to invest it and grow it. You can withdraw the money for qualified medical expenses tax free. And when you reach age 65, you can withdraw it without penalty and use it for whatever you want, though taxes will apply if the expense is not an eligible medical expense.
To open an HSA, you must be enrolled in a High Deductible Health Plan (HDHP). It’s a low-cost health insurance policy that’s a safety net for major health expenses. Use the money in your HSA to pay for the plan’s deductible, co-insurance, and other non-covered eligible expenses. Once your deductible is met, the HDHP kicks in to pay for major health costs.
Check with your employer to find out if your benefit plan includes an HDHP option. If you are already covered by a qualified HDHP and are not currently participating in a general purpose flexible spending account through your employer or spouse’s plan, you may already qualify to establish an HSA for yourself.