Q&A: "Are Health Savings Accounts (HSAs) A Good Thing To Have?"

Question: 

Are Health Savings Accounts (HSAs) a good thing to have?

Answer: 

A Health Savings Account (HSA) can be a helpful vehicle to pay for your qualified medical expenses. Think of it as kind of like a "Medical IRA." You receive an income tax deduction for contributions (up to limit) and you can use the funds tax-free to pay for medical expenses. Plus, earnings on your funds grow untaxed within the HSA. 

If you want to set-up an HSA, you must also buy a High Deductible Health Plan (HDHP). The two go hand-in-hand. 2014 HSA contribution limits are $3,300 for a single or $6,550 for family coverage. If you're age 55+, you can make an additional $1,000 catch-up contribution.

Finally, if you have a regular Flexible Spending Account (FSA) through work, you can retain your existing HSA but can't make further contributions to it. If your FSA is a limited plan (dental and vision only, for example), contributing to an HSA is permitted.