When you need funds to pay qualified medical expenses, you can withdraw them tax-free. And unlike Flexible Spending Accounts, HSAs allow you to roll over unused contributions from year to year. After age 65, you can withdraw funds for any reason. Such nonmedical withdrawals will be taxed, but they won't be subject to penalties.
To open and contribute to an HSA, you must participate in a "high deductible health plan" (for individuals in 2012, a minimum deductible of $1,200 and out-of-pocket maximum of $6,050). You also must be under age 65. The annual contribution limit for individuals in 2012 is $3,100, with an additional $1,000 for those who have reached age 55. For more information on HSAs, talk with your financial advisor. •
Other articles in the April 2012 Edition of Business Matters: