Things You'll Need:
- A list of possible HSA providers
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Step 1
Health Savings Accounts are designed to allow taxpayers to deduct their out-of-pocket medical expenses up to a certain amount every year. Contributions are considered an above-the-line deduction, while distributions are tax-free as long as they are used for qualified medical expenses (and virtually ANY genuine medical expense of any kind qualifies under the definition).
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Step 2
Determine whether or not you are eligible to open a Health Savings Account. If you have access to group health insurance of any kind, then you are not eligible. Generally, those who qualify to take an above-the-line deduction on their health insurance premiums are eligible to open one.
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Step 3
If you are eligible, purchase a qualifying high-deductible health plan (HDHP). This type of health coverage must have an annual deductible of at least $1,100 for single taxpayers and a maximum out-of-pocket cost of $5,600. These numbers double for family coverage. Only HDHP owners qualify to open HSA accounts.
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Step 4
Find an HSA provider. Many banks and brokerage firms offer this type of account, which can be allocated among a wide variety of investments. Find one that charges low or no account maintenance fees.
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Step 5
Once you have opened your HSA, you can contribute a maxmimum of $2,900 if you are single and twice that if you are married. There is also a catch-up contribution of $900 for those aged 55 to 65. This money can either be taken right back out and spent on immediate medical expenses or else invested and left to grow like an IRA.
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Step 6
If your HSA balance grows faster than your medical expenses, then you can use the money for retirement expenses once you turn 59 1/2.
