Head for the slopes with a health savings account

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Head for the slopes with a health savings account

Smart skiers and snowboarders avoid head injuries by wearing helmets for protection. But there's more to protecting yourself than a good helmet. As you plan your winter getaways, take a few minutes to think about health insurance and your financial future. It may not be as appealing as shopping for a new snowboard or looking for the best deal on lift tickets, but protecting your health and finances will give you peace of mind as you careen down the mountain.
 
Save now on taxes and health insurance
If you're no longer covered on your parents' health insurance plan because you've completed school, but you haven't landed that "dream" job yet, you can help protect yourself financially by looking for an individual health insurance plan. If you've started that dream job and want to find a way to reduce your taxable earnings, consider an eligible, high-deductible health insurance plan coupled with a Health Savings Account (HSA).
 
HSAs were developed to maximize your savings on health insurance while providing you with a valuable tax break. An HSA program has two parts, an eligible, high-deductible health insurance plan and a tax-advantaged savings account. The health insurance plan must have an annual deductible of at least $1,000 --which means you'll have to pay the first $1,000 of medical expenses before your health coverage kicks in. This may sound like a lot of money, but not when compared to the cost of emergency or hospital services. You'll have meaningful protection in case of an injury or hospitalization, and many high-deductible health insurance plans also include coverage for services such as annual exams and preventive care. But the main selling point is that high-deductible health insurance plans typically have lower monthly premiums than plans with a lower deductible. In fact, you may be able to cut your monthly health insurance bill in half by choosing a high-deductible health insurance plan over a plan with lower or no deductibles. Thus, if you have a healthy and active lifestyle and rarely need medical attention, you'll be able to obtain good, affordable health insurance!
 
Accumulate savings for the future
The second part of an HSA program is a tax-advantaged savings account, similar to an IRA, that allows you to reduce your taxable income and save money. You can contribute up to the annual deductible of your HSA-compatible health insurance plan into this account every year. So, within certain limits, the higher your health plan's deductible, the more you can stash away on a tax-deferred basis. For example, if you make $40,000 a year and you put $2,000 in your HSA, you'll only pay taxes on $38,000.
 
What happens to the $2,000 that you put in your HSA, you ask? Well, like an IRA, an HSA is meant to encourage you to save for retirement. Funds placed into your HSA can be invested to earn income on a tax-deferred basis and will roll over from year to year until you reach retirement age. Additionally, unlike an IRA, HSAs allow consumers to pay for qualified medical expenses not covered by your health insurance plan with pre-tax dollars (income-tax free!) without any penalty. For example, the funds in the account can be used to cover any qualified medical expense, including over-the-counter drugs and eyeglasses, as well as co-payments and any medical costs incurred before your annual deductible is met. For additional information about HSAs, you can go online to www.ehealth.com/salliemae. So, before you open an HSA or obtain an HSA-compatible health insurance plan, do some more research or contact a licensed health insurance agent to better understand the advantages of an HSA program.
 
Health insurance and tax breaks may not be not as thrilling as the wind stinging your face while you swoosh down those slopes. But, as you're on the way down, you can be a little more confident knowing you are protected with an HSA-compatible health insurance plan.
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