Approximately 30 million Americans have a health savings account (HSA), but not all HSA participants contribute as much as they could in order to take full advantage of the savings opportunities HSAs offer. Here are four reasons why you may consider increasing your HSA contribution.
And, if you’re an employer or in a role that supports employers, join us for HSA Day to learn more about the value of these accounts. Watch the video below for more.
You have more health costs coming
No one enjoys facing an increase in health costs, but unfortunately this is an obstacle almost every employee will go through. Trying to financially prepare for a heavy load of upcoming health costs can be a difficult and stressful task, especially if you haven’t been focused on saving for this type of situation.
If you’re expecting an increase in your future health costs, now would be a great time to start contributing more to your HSA. By increasing your contribution, you won’t have to worry about not having enough money in your HSA to cover your extra medical expenses. Take full advantage of an HSA’s tax savings and that all funds carry over from year to year.
You’ve received a raise
Congratulations! You’ve gotten a raise at work! Whenever you receive a payment increase, it’s a good idea to take another look at your savings and ask yourself, “How much can I contribute to my HSA?” Perhaps with your previous paycheck, you were reluctant or unable to contribute the amount you wanted to in your HSA.
Now is your chance to consider depositing more into your HSA each month. Any money you don’t spend in your HSA is rolled over each year, allowing you to save long-term for future medical expenses. And you can potentially build your HSA balance even more by investing your funds.
You’re more focused on retirement
One survey says a 65-year old couple retiring in 2020 can expect to spend up to $351,000 in healthcare and medical expenses throughout retirement. Some HSA participants use their account for more short-term savings and rely on their 401(k) or IRA for retirement planning, not realizing how helpful an HSA can be for retirement costs. If retirement is around the corner or you’ve realized you’re not currently saving enough for retirement healthcare costs, you should consider contributing more to your HSA.
HSAs provide some retirement-planning perks that a 401(k) or IRA do not. HSA earnings are tax-free, funds carry over year-to-year, and contribution amounts can be changed any time.
Your HSA balance is shrinking
Perhaps you find yourself in a situation where your HSA funds are a little less than you’d desire. Maybe you are newer to the HSA world and were unsure about how much you should be depositing into your HSA. Or you’ve recently had an increase in health costs and realized you should have been contributing more to your account so your balance wouldn’t be currently as low. Now would be a great time to build up your HSA balance. And one of the perks of an HSA is that you can change your contributions at any time during the plan year.
If you’re still struggling with deciding how much to contribute, check out our My HSA Planner tool to determine how much your HSA will be worth over time and how much you could save based on potential contributions.
The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.