If you just want to use the money, but no longer contribute, you really don't need to do anything. It's your money and you can continue to spend it however you like(as long as the charges align with HSA rules) It can stay there forever but you may have to cover the plan fees yourself going forward.
Mathematically, the best outcome is to use the HSA strictly as an investment vehicle and just not touch it until retirement, even for medical expenses. Under that approach, you'd just pay for all medical costs out-of-pocket, including any pregnancy-related costs.
Once you hit 65, you can withdraw your HSA funds for non-medical expenses without penalty and pay only income taxes. But you may want to stop contributing then, too, since you may be eligible for Medicare.
One of the biggest advantages of an HSA is that it offers a triple tax advantage, which means: Contributions to an HSA are federally tax-deductible, reducing your taxable income. Depending on where you live, you may also get a break on state income taxes. Assets in an HSA can potentially grow federal tax-free.
Drawbacks of HSAs include tax penalties for nonmedical expenses before age 65, and contributions made to the HSA within six months of applying for Social Security benefits may be subject to penalties. HSAs have fewer limitations and more tax advantages than flexible spending accounts (FSAs).
If you're able to make the maximum contribution each year, then it's suggested that you do so. Some years you may need to use more of your HSA contributions than other years. Just remember, there's no yearly minimum you have to spend from your HSA and your entire HSA automatically rolls over each year.
Try to invest as much of your HSA money as possible while ensuring that you keep enough cash to cover your qualified medical expenses. Consider where your other retirement plans are invested as well to make sure that your HSA investments provide diversification. Avoid taking out funds from your HSA as much as possible.
If you are age 65 or older and enrolled in the HDHP with an HSA, plan to stop HSA contributions six months before enrolling in Medicare. Be mindful that enrolling in Social Security results in automatic enrollment in Medicare Part A.
Finally, consider which account will give you the most tax benefits. An HSA is taxed in essentially the same way as a 401(k), except it also includes tax-free medical withdrawals, so in that sense, the HSA wins.
If you're unsure of where to start, try working with a financial advisor. What Is the Average HSA Balance By Age? The average HSA balance for a family is about $7,500 and for individuals it is about $4,300. This average jumps up to $12,000 for families who invest in HSAs.
A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your out-of-pocket health care costs.
Determine if you plan to use your HSA to pay for current qualified medical expenses or if you will pay from another source of personal savings. Consider setting aside a "cash target"—the amount of cash in your HSA used to pay for current qualified medical expenses. Then consider investing the remaining amount.
How you use your HSA really depends on your health care needs and longer‑term goals. It's all about balance: Spend when you need to and save as much as you can to take advantage of the benefits of your HSA that can help you be ready for the future.
Contribute at least the amount of your deductible
You'll be responsible for paying for health care expenses out of pocket until your annual deductible is met, so consider contributing at least the amount of your deductible to your HSA.
An account beneficiary may defer to later taxable years distributions from HSAs to pay or reimburse qualified medical expenses incurred in the current year as long as the expenses were incurred after the HSA was established.
Once you turn 65, you can use the money in your HSA for anything you want. If you don't use it for qualified medical expenses, it counts as income when you file your taxes. Six months before you retire or get Medicare benefits, you must stop contributing to your HSA.
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental expenses.
According to the Fidelity Retiree Health Care Cost Estimate, a single person who is age 65 in 2023 should aim to have about $157,000 saved (after tax) for healthcare expenses during retirement. For a couple of the same age, the recommended savings amount is about $315,000.
The main downside of an HSA is that you must have a high-deductible health insurance plan to get one.
An HSA is both a savings and investment account that can give you three tax breaks, according to Ramsey, who deemed them “a hidden gem of investing.” “In the short term, an HSA acts as a tax-advantaged emergency fund for health care expenses.
The short answer: As much as you're able to (within IRS contribution limits), if that's financially viable. If you're covered by an HSA-eligible health plan (or high-deductible health plan), the IRS allows you to put as much as $4,150 per year (in 2024) into your health savings account (HSA).
First off, most experts would recommend maxing out HSA contributions before maxing out 401(k) contributions because of the tax advantages that come with the HSA. There's no minimum age for HSA fund distributions, so when you need it to spend money on health care, it's got your back.
HSA contributions in excess of the IRS annual contribution limits ($3,600 for individual coverage and $7,200 for family coverage for 2021) are not tax deductible and are generally subject to a 6% excise tax.
Sacrificing other financial goals: If you have the spare money, there's nothing wrong with maxing out your HSA. But if you're behind on other financial goals, like paying off student loans or saving for a down payment, you might want to tackle those first and make smaller HSA contributions.