Workers are in the heart of open enrollment season for next year's benefits, and rising healthcare costs are shining a spotlight on an offering that includes a tax-advantaged investment account.
Healthcare expenses are climbing for workers and employers alike, with average total family premiums, including the employer's share, averaging $28,303, up 5% from a year ago, according to data from health policy organization KFF, formerly the Kaiser Family Foundation.
To manage the costs, a growing number of employers are moving to high-deductible health plans, which work alongside health savings accounts or HSAs. Almost 40% of companies with at least 10 employees that offer health benefits also have an HSA-qualified plan, KFF found.
Health savings accounts have three major tax advantages. First, contributions that your employer automatically deducts from your pay aren't taxed. Second, money stashed into the HSA grows free of taxes. Finally, you can make tax-free withdrawals for qualified health expenses – just be sure to save your receipts.
"I love HSAs because of their triple-tax advantage," said Eileen Olson, CFP and founder of Emerald Wealth in Daufuskie Island, South Carolina, near Savannah, Georgia. "For people who can afford to leave it alone, it can be one of the best retirement accounts they're going to have."