How Much Should I Contribute to My HSA?

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. Understanding how an HSA works, or how to use it in a way that makes sense for your lifestyle and financial goals, can be tricky.

An HSA gives you greater control of your healthcare expenses and potential savings, while also providing an avenue for you to build a nest egg for retirement and investing. With an HSA, you experience a triple-tax advantage: Contributions are tax-free, earnings are tax-free and withdrawals for eligible expenses are tax-free. Accountholders can truly maximize the potential of an HSA by tapping into its investment capabilities.

How much should I contribute to my health savings account (HSA) each month?

The short answer: As much as you’re able to within IRS contribution limits, if that’s financially viable.

The slightly longer answer: If you’re covered by an individual high-deductible health plan (HDHP), for 2022 the IRS allows you to put as much as $3,650 per year ($3,850 in 2023) into your HSA. If you’re contributing to an HSA, and on a family HDHP, the maximum amount that you can contribute is $7,300 per year ($7,750 in 2023). If you’re 55 or older on an individual plan, you can contribute an extra $1,000 annually for a total of $4,650 or $8,300 for accountholders on a family plan ($4,850 or $8,750 in 2023) — with catch-up contributions accepted at any time during the year in which you turn 55.

What is an HSA contribution?

An HSA contribution is the deposit of funds (for example, from a bank account or your paycheck) into your HSA. HSA participants are advised to contribute the maximum amount each year because the dollars going into these accounts are tax-free. All HSA funds carry over from year to year, and your HSA stays with you even when you change jobs. This is the portability benefit that ensures accountholders are able to save long term for future medical expenses.

Preparing for retirement

One oft-cited estimate: A 65-year-old couple retiring in 2022 will need an average of $351,000 in healthcare costs throughout retirement. Monthly cash flow is certainly a concern for all, and if you’re uncomfortable contributing the IRS annual max to your HSA through pre-tax payroll contributions, contribute the maximum amount that you are comfortable with.

An often overlooked benefit that an HSA affords is the ability to contribute post-tax dollars and take an above-the-line deduction, essentially reducing taxable income for every post-tax dollar that’s contributed to the HSA. Additionally, accountholders have up until the tax filing of the following year to make these post-tax contributions for the previous year.

Consider the savings in HDHP premiums

At first glance, contributing the IRS-allowed maximum to your HSA in one year may sound unimaginable. But when taking into account the premium savings of a HDHP, compared to a traditional health plan, plus tax savings gained through contributing to an HSA, it becomes more realistic.

Need help determining how much you should set aside in your HSA each month to reach your retirement savings goal? First American Bank Health Account Services provides a free HSA calculator that will help you determine the right amount for you, taking into account your health plan coverage type, deductible amount, number of years before retirement, monthly healthcare expense and more. 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.

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