How to turn your High Deductible Health Plan into vacation cash

High deductible health plans (HDHPs) are more than insurance; they're a way to save $. These are plans for healthy people with no critical pre-existing conditions who rarely visit the doctor, but want to protect their assets from being sucked into the healthcare system in the event of an emergency.

Are they a good idea? You bet!

In 2011, a family of two or more on a HDHP can invest up to $6,150 before taxes into a health savings account (HSA, a special bank account that is only allowed if you have a HDHP). That means when you send in your taxes on April 14, 2012, you can contribute to your 2010 HSA all the way until April 14 and it will be deducted from your gross earnings, meaning you will not pay tax on that money.  The deposits and interest are tax deferred and they accumulate year after year.

The way an HSA works, you could use that money to pay health-related costs (medical bills, dental visits, vision expenses, braces, et al) toward your deductible.  This is a great way to budget for medical expenses, but there is another way to make that tax deferred money work for you. Let’s say you have enough cash to cover those expenses without taking the money out of your HSA, so you let that money continue to accrue interest. The following year, you are invited on a college reunion cruise and you need the $1,000 down payment in 30 days. You wish you had the cash to put that first class cabin on hold, but wait a minute….you do!

Turn in all those medical expense receipts that paid in cash and your HSA financial institution will send you a reimbursement for those medical expenses. There’s your $1,000 ready to hand to the travel agent!

There is no end to all the surprises in life - reunions, weddings, an invitation to your friend’s ski lodge. Don’t let life pass you by. Plan now; play later.

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