Friday, January 27, 2012

Advantages Of An HSA For Pre-Medicare Years

What do I mean by pre-Medicare?
Most Americans qualify for Medicare health insurance benefits at age sixty-five. But medical insurance rates really tend to rise after we reach our fiftieth birthday.
A new term has been coined to describe older folks who are still too young for these government health benefits, but feel the pinch of rising medical plan premiums. In case you are wondering, the term has no official meaning that I know of, but it might mean something to millions of people in that age group who need to find their own health benefits.
Is there a way to find inexpensive medical coverage from age fifty to sixty-four?
Actually, if you need to purchase your policy on the private market, and you are over fifty, you are probably not going to find "cheap" rates. You may find an affordable and sensible medical plan that you can live with.
What Are Health Savings Accounts (HSA)?
The medical plans actually come in two parts that work together to help people control their medical costs.
  • The first part is a real savings account. This account is used to save money to use for out of pocket health costs. Some examples of these costs are deductibles, copayments, and qualified expenses that are not covered by major medical. Some of these will give you a debit card that can be used with the account whenever you need to pay for qualified services.
  • The second part of the plan is a real major medical health insurance policy. These policies may have higher deductibles. This also helps control costs because, all things being equal, a higher deductible policy should be cheaper and easier to get accepted for.
How does this plan account help people control costs?
  • Contributions to your account are tax deductible within limits set by the Internal Revenue Service. This means you can pay for your expenses with pre-tax money.
  • Some of these accounts actually pay out interest on the unused balance.
  • The balance can roll over from year to year. You do not lose your money if you do not spend it.
  • At retirement, you can withdraw unused money without penalty. If you do not have high expenses, and you saved more than you spent, you are free to use the money for your retirement years.
What are some advantages for your pre-retirement years of this type of medical plan?
Hopefully, after reading my outline, you can understand why HSA plans are good for many older people. They can help you reduce your taxes, control your health costs, and maybe even save money for retirement.
That is not to say that these plans are the perfect solution for everybody. As you have probably already figured out, the savings account will not do you any good if you never put any money in. If you are concerned about your ability to actually save money, and would rather pay a bill, another type of policy may be better for you. If you cannot really use an extra tax deduction, those benefits may not help you much either.

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