No matter how healthy you are and how great your health insurance is, you will always have out of pocket medical costs. One of the best ways to combat out of pocket health expenses is a Health Savings Account. Whether you’re considering opening an HSA account or you’ve had one for years, it’s important to know how to maximize the benefits of an HSA. Keep reading to learn how to make the most out of your HSA.
- Maximize Your Contributions
HSA’s have triple tax benefits: your contributions, earnings, and withdrawals are all tax free. These types of accounts are categorized as savings accounts but also act as investment accounts by allowing your balance to roll over each year. By beginning to contribute to an HSA early on in your life, you give your HSA the potential to compound interest and grow your HSA savings over time.
The HSA contribution limits for 2022 are $3,650 for individuals and $7,300 for family coverage. If you’re 55 years old or older, you are allowed $1,000 extra as a catch-up contribution.
If you have an employer sponsored 401(k) and a HSA account through your health insurance, a good way to maximize savings is contributing enough into your 401(k) to maximize your company’s match policy, then putting the rest into your HSA.
- Invest Your HSA
While an HSA is listed as a savings account, it is also an investment account. HSA contributions normally go into a money market but if you want to plan for retirement savings with your HSA, you can choose how your funds are invested. It’s a great idea to look at different investment options across different providers. However, be aware that if your company offers a match for HSA savings, the match will only be applied to the brokerage of their choosing.
- If You’re Looking For Additional Retirement Savings, Don’t Dip Into Your HSA
If you can manage financially, pay for all of your health expenses not covered by insurance out of pocket and don’t utilize your HSA. This will allow all of your contributions the opportunity to build and grow year after year as it rolls over. However, you can save the receipts for your out-of-pocket medical costs and claim them later on when you are utilizing your HSA in retirement.
- Be Aware of Medicare
Once you are enrolled in Medicare, you are no longer allowed to fund your HSA. Keep that information in the back of your mind when you are getting closer to the age of 65. Even if you are employed and still have health insurance through your employer, you may be required to sign up for Medicare depending on your employer and the type of health insurance coverage you receive. If you claim Social Security benefits, that enrolls you in Medicare Part A by default. With this information in mind, plan your HSA contributions accordingly.
An HSA can be an amazing asset to your financial portfolio. If you’re looking for guidance on maximizing your HSA, our advisors at Total Clarity Wealth Management are happy to assist. Give us a call today to get started.
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. No strategy success or protects against loss. Investing involves risk including loss of principal.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.