As they were only signed into law in December of 2003 by President George W. Bush, health savings accounts are still fairly new to the American public. Many people may not be aware of the associated benefits and advantages of this new program.

What is a Health Savings Account?

Health savings accounts are basically an improved version of the old medical savings accounts. These accounts are set up by the individual through a certified HSA trustee, such as a bank or insurance company that has been approved by the Internal Revenue Service. These accounts allow someone to set aside money for future medical expenses.

Contributions to a Health Savings Account are Tax Deductible

Any contributions that the account holder makes to a health savings account are tax deductible. In addition, any contributions made by the account holder’s employer may not count toward the person’s gross income, and any interest earned on assets in the account is not taxed.

Health Savings Accounts are Portable

Unlike some retirement plans, health savings accounts are completely portable. This means the HSA goes with a person when he changes jobs, which makes it easier for him to keep his contributions consistent.

Money Received from a Health Savings Account May be Tax Free

So long as the money is being used for qualified medical expenses, it may be exempt from taxes. A qualified HSA trustee can provide a list of which medical expenses qualify, or the account holder can get the information directly from the Internal Revenue Service.

Contributions to a Health Savings Account Accrue over Time

Just as with a 401(k), the contributions made into a health savings account can make money over time. This happens when the account draws interest or when the assets contained in the account increase in value. Provided the account holder has made steady contributions to the account for several years, this can add up to a substantial amount of money.

The Money in a Health Savings Account can be Withdrawn at any Time after Age 64