Health savings accounts are a great way to save for medical expenses. An HSA allows the employee to payroll deduct pre-tax dollars into a special bank account that can only be used for medical spending. In 2017, the amount that can be saved will increase to $3,400 for self-only coverage (a bump of $50 over 2016) and $6,750 for family coverage-unchanged from 2016.
Health savings accounts must be coupled with a “high deductible health plan” which is defined as a health plan with an annual deductible that is not less than $1,300 for single coverage and $2,600 for family coverage-unchanged from 2016. The maximum annual out-of-pocket expenses which include deductibles, co-payments and other non-premium fees cannot exceed $6,550 for single coverage and $13,100 for family coverage – both unchanged from 2016.
HSAs are also a great supplement for retirement savings. Unlike flexible spending accounts, that must be used each year or forfeited to your employer, a HSA is your own bank account and unspent funds are yours. The stipulation is that you have to use the money for designated medical expenses. If you are maxing out on your retirement savings consider loading up your HSA. You can carry the balance into retirement and pay for medical expenses from the account.