How to Figure If an HSA Is Good for You?

Health savings accounts, or HSAs, were created in 2003 to help people save tax-free funds for future medical expenses. Part of the trend toward consumer-driven health care, HSAs offer individuals more control over their health care decisions. A number of factors need to be considered before deciding it makes sense to set up an HSA.

Instructions

• 1

  Review your current health care plan. If you are covered by a high-deductible plan (one that has a high deductible before insurance starts to cover your medical costs) and only a high-deductible plan (dental, vision and disability insurance won't disqualify you), you are eligible for a health savings account. You must also be under age 65. In addition, if you withdraw funds for non-medical expenses before you turn 65, you must pay taxes as well as a 10 percent penalty.

• 2

  Determine your current health care needs. Are you relatively healthy and do you have small medical bills? If so, an HSA might be a good choice, since the account allows you to save money for future expenses. However, if you are suffering from a chronic illness and need funds regularly, an HSA might not be a good idea.

• 3

  Assess your willingness to research health care. HSAs give you the freedom and flexibility to shop around for the best option, and some people enjoy doing this research. If you prefer more cut-and-dried options and get confused when researching health care costs and choices, an HSA may prove more frustrating than satisfying. Also, while HSAs offer individual control over health care, you must be organized and keep all receipts.