Back in May 2018, the Internal Revenue Service (IRS) announced an increase to the maximum health savings account contributions limits for 2019. This year, the health savings account contributions limit for individual coverage is up to $3,500 and up to $7,000 for families. Those 55 and up may make an additional $1,000 in health savings account contributions in 2019. If you are currently on your employer’s high deductible health insurance plan, or if you are covered by a spouse or family member, you may be eligible for a health savings account (HSA).
If your high deductible health insurance plan also offers a flexible spending account (FSA), and if you’re already saving for retirement, you may be on the fence about opening an HSA. After all, you can use your FSA to cover things like copays and procedures until you hit your deductible, and you can continue to use those funds for many other medical-related expenses. Your retirement account means that you’re already striving to safeguard your future. What more can an HSA do that you’re not already doing?
The short answer is: a lot. One of the biggest advantages of an HSA is that it’s triple tax advantaged. Your health savings account contributions are not taxed when made via salary deferrals and are tax deductible when contributed from your own funds. The money in your HSA grows tax free, and when you withdraw funds to cover health-related expenses, qualifying withdrawals are tax-free, too.
While it is certainly a good strategy to let your HSA savings grow, you are not prohibited from using your health savings account contributions for what they’re intended for – covering health-related expenses under your high deductible health insurance plan.
Why should those with a high deductible health insurance plan consider an HSA a part of your retirement plan? Think about the money you are currently saving toward retirement in a 401(k), IRA or other retirement savings vehicle. Contributing to an HSA now can help you cover future health-related expenses once you have retired (even Medicare premiums after 65), limiting the amount of money you will need to use from other savings.
As soon as you are able, begin making the maximum annual health savings account contributions to take full advantage of your account. Learn more about a USB health savings account or how to manage your current HSA by scheduling a complimentary goal planning session with our FutureTrack team today.