How to make a health savings account work for you

It is open-enrollment season, and many Americans may consider opening health savings accounts — or HSAs — to reduce their taxable income and save for health-care expenses.

As long as you belong to a qualified high-deductible health plan, you can use money from your HSA to cover the cost of deductibles, co-payments and co-insurance.

It's important for consumers to "take control of their accounts to get maximum benefits," said Dr. Stephen Neeleman, founder of HealthEquity, a Utah-based company that manages more than $2.6 billion deposited in 1.5 million health savings accounts held by individuals and families.

Here are a few ways to make the most of your HSA:

  • Know what expenses are eligible. Do some research to find out what health-related costs can be paid with HSA funds. Even massages and acupuncture may qualify as legitimate expenses, as long as your health insurance plan permits it.
  • Understand the rules for withdrawals. One of the best perks is that you can withdraw HSA funds tax-free for qualified medical expenses, but some restrictions may apply. Make sure to withdraw your funds properly.
  • Contribute as much money as you can. Automatic payroll deductions make it simple to build savings. In 2016, individuals can put up to $3,350 into their HSA, and families can contribute $6,750, a $100 increase over this year. Those age 55 and older can contribute an extra $1,000.

You may also be able to use an HSA to bank against future health-care expenses, by investing unused HSA money in mutual funds or other investments. So check out your HSA-related investment options. They can provide a savings account for health-care needs in retirement.

"As the value of your HSA grows and you have enough to cover unexpected health-care expenses, consider investing the part not needed for expenses in mutual funds within your HSA," said Dr. Carolyn McClanahan, a financial advisor and founder of Life Planning Partners in Jacksonville, Florida. "This may be a good way to generate returns. Although as with all investments, the value can go down."