Making the most of your HSA- Strategies for every age and stage

Whether you’ve just started contributing to your health savings account (HSA) or have had one for years, chances are it offers more savings power than you realize. From paying your health plan deductible to buying braces to getting reimbursed for prescriptions, your HSA allows you to cover eligible medical expenses using pre-tax dollars.

No matter where you are in life—or where you’re headed—here’s what you can do to make the most of your HSA.

I'm in my 20s...
What can an HSA do for me?

HSAs are exclusively for people enrolled in a high-deductible health plan. High-deductible health plans are extremely popular with young people because the monthly premiums are typically lower. And let’s face it, as a young person you tend to be healthier and, therefore, less likely to need a lot of medical care.

By contributing to an HSA starting at an early age, you have the opportunity to let your money compound tax-free for 30-40 years. A parent or loved one can also make contributions to your HSA on your behalf. In total, contributions are limited to the annual maximum set by the IRS. For 2018, the IRS maximum is $3,450 for individuals and $6,900 for families.

Unlike a Flexible Spending Account (FSA), you own your HSA and it's yours for life. Any unspent funds roll over from year to year. You can use the funds now or in the future and even save them to help you pay for health care during retirement.

I'm in my 40s...
I have an HSA, but am I using it the right way?

Regular checkups are one thing. But between Bobby’s braces, Julia’s allergy medicine, and your eyeglasses, once you hit your 40s you may be paying a pretty penny to keep everyone healthy.

At this stage of life, an HSA offers you a tax-advantaged way to pay for common medical expenses. Let’s assume that you’re in the 25% tax bracket. Paying with pre-tax HSA dollars is like getting a 25% discount on things like your prescriptions, fillings, and ankle wraps—helping you stretch your money. You can pay qualified health care expenses right away using your HSA dollars, or you can pay cash, save your receipts and get reimbursed later—which gives your money more time to potentially benefit from compounding.

Retirement is on the horizon...
How can I maximize my HSA?

The first thing you can do if you’re age 55 or older is to take advantage of the higher HSA contribution maximum allowed by the IRS. In 2018, that means you can contribute an extra $1,000, which equates to $4,450 for individuals or $7,900 for families.

While it might seem challenging to increase your contributions, you should seriously consider how you could juggle your finances to allow you to save more while you are still working. Even people who have healthy diets, exercise regularly and limit their vices don’t get a “good health guarantee”— and almost everyone becomes a bigger consumer of health care as they age. Consider this: A healthy couple may need up to $265,00 for health care expenses after they retire². When paying for health care costs in retirement, the HSA is a smart way to go. The money you contribute may be tax-deductible with a potential for tax-free growth. It can also be used to pay for qualified health care expenses tax-free. Medicare premiums³, long-term care, nursing services, medications and more⁴ are all currently qualified to be paid from an HSA account.

Maxing out your HSA to establish a nest egg to use for qualified health care expenses can free up your other savings— enabling you to do the things that are important to you.