Once you sign up for your health savings account (HSA) and start making contributions, you might be wondering “What can I do to make the most of this powerful little tax-advantaged account that I just opened?” Read on for some helpful tips on how to make the most of your HSA account:
Max Out Your Contributions
When you start to contribute to your HSA, you will no doubt have a number in mind in terms of the amount you plan to contribute every month to your account. The IRS currently caps the contribution amount for 2022 at $3650 for self-only HDHP plans and $7300 for individuals with family plans. If you are 55 or over, you can make catch-up contributions of $1000 dollars.
Since HSA’s have the triple-tax advantage and the funds don’t expire at the end of the year like Flexible Spending Accounts (FSAs), it is beneficial to you to max out your contributions if you are able to or put as much as you can into your HSA.
Invest, Invest, Invest
According to PlanSponsor, with healthcare costs going up, the estimates for the cost of healthcare for a single person retiring today are upwards of $150,000 and for a couple are upwards of $250,000. With numbers this high, it only makes sense that the cost of healthcare should be figured into your retirement planning.
One handy feature of your HSA is that you can reserve a portion of the account for investment purposes and begin to leverage it as a retirement account (like an IRA or a 401(k) account). As mentioned above, the HSA funds don’t expire, therefore, the money can grow year after year.
Plan Wisely With Your Qualified Medical Expenses
When you first learn about an HSA, it can be exciting to see all the different qualified medical expenses you get tax-free. In fact, it can be tempting to pay for all your expenses with the account. However, let’s say that you have a known, larger expense coming up, it could be worth it to save the money in your account for that and pay for the smaller expenses out of pocket. Or you might want to use the account solely for retirement-related healthcare expenses. As you can see, there are many options, when it comes to your HSA!
No matter which way you use your HSA, taking the steps to learn more about how you can better leverage your account—whether it be through maxing out your contributions, investing, or thinking about how you use your qualified medical expenses—is a step in the right direction!
Note: Please be sure to consult with your tax advisor as this article is not meant to replace investment or tax advice.