HSAs: Part of your financial plan
Your HSA can be used as part of your broader financial planning to create a savings nest.
HSAs: Part of your financial plan
If you are like most people, you may think about your health savings account solely as a way to pay for current-year qualified medical expenses, such as trips to the doctor or prescriptions. But did you know it can also be used as a savings tool? Your HSA can be used as part of your broader financial planning to create a savings nest egg and potentially save big on taxes.
Consider contributing the max allowed
The more you contribute to your HSA today, the more you have for retirement in the future. Each year the IRS sets limits on how much you can contribute to your HSA. Know the limits that apply to you, consider contributing the maximum allowed, and watch your savings grow!
Here are the IRS contribution limits:
- $3,550 for individual coverage in 2020; $3,600 in 2021
- $7,100 for family coverage in 2020; $7,200 in 2021
- $1,000 additional catch-up contribution for age 55 and over
Direct contribution through Optum Bank - You can send a contribution check to Optum Bank. To send a contribution check, you will need to fill out the "Contribution/Deposit Form" found under "Statements & Docs" after signing into your account.
It is your responsibility to monitor your contributions to ensure they do not exceed the annual contribution limit per IRS regulations.
Comparing financial accounts
Unlike other accounts, an HSA is one of the only savings vehicles that allows you to put money in tax-free, grow your savings tax-free (interest and investment earnings are not taxed), and take the money out income tax-free for future qualified medical expenses.
Investing with your HSA
Once your HSA reaches the $1,000 investment threshold, you may choose to invest a portion of your HSA dollars in mutual funds. You can invest any balance over $1,000, in $100 increments. Any earnings such as interest or dividends are income tax-free. This gives you the potential to grow your HSA retirement savings even more.
Planning for retirement: How much will you need?
Knowing how much money you will need in retirement can be confusing. Luckily, Optum Bank has tools to help. You can get a personalized estimate of how much you may need to save for medical expenses in retirement by taking the health savings checkup tool.
Using your HSA during retirement
The benefits of an HSA don’t stop when you retire. While you are no longer allowed to contribute to your HSA after enrolling in Medicare you can still use your HSA funds income tax-free to pay for qualified medical expenses. You can
also use your HSA to pay for Medicare premiums and qualified out-of-pocket expenses including deductibles, copays and coinsurance for:
- Part A (hospital and inpatient care)
- Part B (doctor and outpatient care)
- Part D (prescription drugs)
As an additional benefit, once you turn 65, you can withdraw the money from your HSA for nonqualified expenses without a penalty. You will just be required to pay ordinary income tax on that amount. Include your HSA as part of your financial planning strategy. Take advantage of both the short- and long-term tax benefits of an HSA.
Withdrawing funds during retirement
You can use the money in your HSA to pay for qualified medical expenses at any time. Once you turn 65, however, you can withdraw the money from your HSA for nonqualified expenses without a penalty. You will just be required to pay ordinary income tax on that amount.
