Unless you have a chronic illness, kids, or are expecting.

The healthiest and wealthiest insured Americans have a health savings account. That’s the conclusion of a poll of more than 1,000 U.S. adults on their current health plans.

A low-deductible plan makes doctor visits cheaper, but high-deductible plans make you eligible for an HSA. Those who hold them are in a better place with their physical and financial health, according to HSA Bank — which obviously wants HSA business. A low-deductible plan is better for those who need to see their doctor frequently.

“Consumers are taking a proactive approach maintaining their physical health, but not necessarily their financial health,” says Chad Wilkins, head of HSA Bank. “However, the research did find that consumers enrolled in high deductible health plans with health savings accounts are generally ahead of the curve when it comes to wealth engagement.”

But the research didn’t rule on whether lower- to middle-income Americans can afford saving with HSAs.

More wealthier Americans contribute to an HSA, according to the Tax Policy Center. A little over 16 percent of taxpayers earning over $200,000 annually contributed to an HSA in 2014, while only five percent of those with an income of $30,000-$50,000 did.

However, the number of HSAs has increased 16 percent from 2016-17 alone, says Devenir, an HSA services firm.  More than 20 million Americans have one today. In 2006, only a little over 3 million did, says a study from America’s Health Insurance Plans (AHIP).

What is a health savings account?

It’s exactly what it sounds like — a savings account for medical expenses. You sock away money and accrue a little interest. But the interest you build, your contributions, and withdrawals you make are all tax free. It’s like an IRA for healthcare, according to Bankrate.

Many employers offer HSAs alongside their health benefits, but you can also open one through many banks and other financial institutions.

“HSAs give consumers more options and control over their health care — and that will help bring down costs,” says Marilyn Tavenner, president and CEO of AHIP. “HSAs give consumers the power to choose and the power to shop. With an HSA, consumers can look for the most cost-effective services and products that meet their individual needs. Not only do consumers save money, they can use these tax-free dollars to pay for them.”

There is a cap on how much you’re allowed to contribute every year: Up to $3,400 individually and $6,750 for a family, says a report from NerdWallet.

There are a few drawbacks to HSAs. To qualify you must be enrolled in a High Deductible Health Plan, which means you pay more out of pocket before your health insurance kicks in. Your deductible has to be at least $1,300, and your out-of-pocket limit can’t exceed $6,550, according to NerdWallet. For a family those prices are $2,600 and $13,100, respectively.

They’re good for retirement savings

To retire comfortably it’s recommended that you save $1 million to $1.5 million, according to AARP. That’s no easy feat to achieve. The amount that your healthcare will cost you and your spouse is estimated around $260,000, says a study from Fidelity Investments. Both companies recommend using an HSA to help with the savings.

Here’s why: Social Security and your retirement accounts don’t cover all that you need plus health emergencies. HSAs allow you to use what you need for medical expenses today, while you can also make investments through mutual funds, stocks and other investment tools to earn more money.

How do people take advantage of HSAs for retirement savings? Here’s how Fidelity explains it…

Some account holders wait until they accumulate a large enough balance to cover their annual estimated out-of-pocket medical costs before they invest. Others invest immediately, opting to pay their medical costs out-of-pocket and use their HSA as a long-term investment account for retirement.

So yes, they can be expensive, and not appropriate for everyone’s healthcare needs. But if you can fit the high deducible plan and HSA into your lifestyle, it may save you plenty for your golden years.

Meet the Author

Joe Pye

Joe Pye

Associate editor

Pye is the associate editor of Debt.com.

Budgeting & Saving, Retirement

health, healthcare, seniors

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Article last modified on April 12, 2018 Published by Debt.com, LLC . Mobile users may also access the AMP Version: The Perks of a High-Deductible Health Plan - AMP.