Contributions below the maximum: Relative to 2022, average HSA contributions increased. Average employee contributions rose to $1,962, while the average employer contribution decreased slightly to $762.
You can start small, perhaps setting aside $25 to $50 per paycheck. Consider also trying to cut back on non-essential spending, such as foregoing one of your app subscriptions, reducing meals out or making your morning cup at home versus going to a coffee shop.
Contribute the maximum amount: Since the money in your HSA does not expire, it's a good idea to contribute as much as you can each year. The HSA contribution limit for 2024 is $4,150 for individuals and $8,300 for family coverage.
An HSA contribution match is a simple concept. You add money to an employee's HSA based on how much they put in, similar to a 401(k) match. For instance, you may match 50% of the employee's HSA contribution up to a certain percentage of their salary or you can commit to a dollar amount up to a pre-set threshold.
Section 4980G of the Internal Revenue Code provides generally that an employer who contributes to the HSA of any employee during a calendar year must make comparable contributions to the HSAs of all comparable participating employees.
HSAs lower insurance premiums
One of the primary reasons why you may want to offer an HSA to your employees is because they can help you save on health insurance premiums. HSAs are only eligible for those with HDHPs, which carry high deductibles but have much lower monthly premiums.
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).
Best. Contribute at or near the maximum and invest most of it for the long term. This affords you the full triple tax benefit. For 2025, contribution limits are $4,300 (an increase of $150 from 2024) for individual coverage and $8,550 for family coverage (an increase of $250).
What happens if I contribute to my HSA more than the maximum annual limit that the IRS allows? 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.
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.
Pre-tax contribution:
The earnings in the account aren't taxed. Contributions made toward your HSA through payroll deductions are excluded from your gross income. In addition, contributions made to your HSA by your employer may be excluded from your employment taxes (like Social Security and Medicare taxes).
After maxing HSA contributions, then contribute additional money to a 401(k). Maxing contributions to both your HSA and retirement accounts should help you build a nest egg your future self will appreciate.
HSAs have risen in popularity over the past few years because, in combination with high-deductible health plans (HDHPs), they can vastly reduce the monthly premium you and your employer pay. A higher deductible means lower premiums, and that could mean huge savings for you and your employer.
$4,868: Average HSA account balance at the end of March 2024, according to Bank of America's 1Q 2024 Participant Pulse study. That's up from $4,380 at the end of 2023. 2.9 million: Number of accounts that have at least a portion of their HSA dollars invested, representing about 8% of all accounts, according to Devenir.
True to its name, the deductible is higher. Plans will vary, but generally a minimum of $1,650 for individuals and $3,300 for families1. Will vary by plan and by employer, but generally are lower. Out-of-pocket limits are higher in an HDHP.
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).
The bottom line is that when deciding between HSA healthcare plans and other plans, there's more to consider than just current healthcare costs, and it often makes sense to max out your HSA. An HSA can be an important part of your long-term retirement savings and greatly impact your lifetime income tax bill.
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.
Myth #2: If I don't spend all my funds this year, I lose it. Reality: HSA funds never expire. When it comes to the HSA, there's no use-it-or-lose-it rule. Unlike Flexible Spending Account (FSA) funds, you keep your HSA dollars forever, even if you change employers, health plans, or retire.
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental expenses.
If you don't have an HDHP, have a family, and require frequent diagnostic medical care, a copay plan may be a better option. Neither an HSA or copay plan is better than the other; you just need to decide which plan meets all of your needs and will benefit you the most.
Employer contributions to HSAs are optional, but most employers provide funding for employees' accounts. Employers can contribute to HSAs either with a Section 125 plan or without one. Using a Section 125 plan provides more flexibility for setting different HSA contribution amounts and offers significant tax savings.
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.
Are excess contributions subject to a penalty? Yes. In general, an excise tax of 6% for each tax year is imposed on the HSA owner for any excess individual and employer contributions made to their account that are not removed within the same tax year.