Lower Your Health Care Costs

Health savings accounts help defray the cost of high-deductible health plans. They’re also a powerful way to invest for retirement.

- Nellie S. Huang And Kaitlin Pitsker

High-deductible health plans have a well-deserved reputation as a way for employers to pass along some of the burden of spiraling health costs to you. They typically come with lower premiums than traditional insurance plans but require you to pay for more of your medical costs before your insurance kicks in.

Such plans have become more prevalent in recent years. Last year, 30% of people with employer-sponsored health insurance enrolled in high-deductible plans, compared with just 8% a decade earlier, according to the Kaiser Family Foundation. For some people, a high-deductible plan may be the only choice offered by their employer.

But high-deductible plans also give you access to a health savings account. And an HSA has secret powers that most people haven’t begun to tap. An HSA isn’t just a short-term, tax-friendly way to pay for current and future medical bills; it’s also a vehicle for supercharging your retirement savings.

For Marianela Collado, a certified financial planner in Weston, Fla., switching to a high-deductible plan and opening an HSA five years ago was an easy decision. Marianela, her husband, Edgar, and their three boys were healthy and rarely visited the doctor aside from annual checkups. The family began funneling cash into their HSA and covering current medical expenses out of pocket so the account could continue to grow.

Today, Marianela and Edgar, who are both in their early forties, contribute the maximum to their HSA each year, investing most of the money in a portfolio of growth-oriented stocks. “We hope to leave the account untapped for 20 to 30 years so it grows as much as possible,” Marianela says. Then, she says, they can use that money for medical expenses during retirement.