Saving for the future

Nancy is healthy and doesn't want to over-insure herself with a traditional health plan. During her company's annual benefits enrollment, she signs up for a high deductible health plan (HDHP) paired with an HSA. Nancy is in a 15% tax bracket. With the money she is saving on monthly premiums (HDHPs typically offer lower premium costs), she decides she can afford to put $200 a month (or $2,400 a year) into her HSA:

  • Nancy will save $360 in taxes for the year.
  • She ends up having a healthy year and spends only $600 from her HSA -- for allergy medication and an eye exam, because her preventative and well-care appointments were covered by her HDHP. Her balance of $1,800 rolls over into the next year, along with the interest earned on her HSA money.
  • Nancy decides that once she accumulates more money in her account in the future, she will keep a portion in cash (an amount up to her deductible, and maybe an extra bit for any out-of-pocket costs) and invest the rest in mutual funds for growth.

With her eye on the future and active management of her HSA, Nancy feels pretty good about her health expense strategy.