Why I’ve Decided to Max out my HSA in 2013 & Beyond (While I can)
Update: the 2015 maximum HSA contribution has since been announced and increased.
Over the past year, I’ve become a big fan of HSA’s.
They are a bit like an IRA on steroids (if those steroids were purchased from tax-free HSA distributions).
Tax free (pre-tax) contributions, growth through investment, and distributions? Yeah!!
Unlike an FSA, contributions roll over from year-to-year, and they are portable, meaning you can take them with you from one employer to another or to self-employment.
Unfortunately, I did not elect to add any personal funds outside of my employer’s HSA contributions in 2012.
That was a missed opportunity. Outside of grabbing employer 401K matching funds, there’s no more of a clear no-brainer than HSA contributions, when it comes to enhancing your financial future via savings. That’s why I’ll be continuing with my HDHP vs a PPO and taking it one step further by maxing out my HSA in 2013.
How much is the HSA contribution maximum?
Like 401K’s and IRA’s, the IRS indexes HSA contribution limits to inflation.
2013 Maximum HSA Contribution Limits
The 2013 HSA contribution maximum contributions are set at:
- Single Plan: $3,250 (up from $3,100)
- Family Plan: $6,450 (up from $6,250)
As with 401K’s there is a catch up contribution for those age 55 and over. The 2013 HSA catch-up contribution is $1,000 for both single and family plans.
In most cases, you’ll have to decide your HSA contributions for the following year during your open enrollment.
HSA’s Must be Paired with a HDHP
Unfortunately, HSA’s are not available for everyone.
A high deductible health plan (HDHP) must be your form of health insurance plan in order for you to be eligible for an HSA. Per the IRS, HSA contributions are only eligible for HDHP’s that have:
- An annual deductible of at least $1,250 for self-only coverage or $2,500 for family coverage (up from $1,200 and $2,400 in 2012); and
- Annual out-of-pocket expense maximums (e.g., deductibles, co-payments, and other amounts, but not premiums) up to $6,250 for self-only coverage or $12,500 for family coverage (up from $6,050 and $12,100 in 2012).
Health Care Costs are Going Nowhere but Up. HSA’s are a Hedge
With our profit-driven health care model in the U.S., expenses are significantly higher than any other nation per capita and growth exceeds inflation every year. Until we move to a single payer system, there will be no relief.
So why not build as much of a cushion as possible to protect yourself from future expenses?
Why would you ever pay for medical expenses with after-tax dollars if you could avoid doing so?
As noted earlier, unlike FSA’s, HSA contributions roll over from year-to-year, and they are portable, meaning you can take them with you from one employer to another or to self-employment.
An additional objection might be – “what if I stay healthy and don’t spend all of the funds on medical expenses?”.
When you turn 65, you can use HSA funds on not just medical expenses, but anything, without penalty.
And remember, the entire time, you can grow your contributions through investments, just like any other retirement account. With medical expenses, it’s even more important to not let inflation erode your savings.
There are some questions about what will happen to HDHP’s and HSA’s when the new Affordable Care Act insurance requirements kick in for those over age 30, but for now, I’m going to take full advantage while I can.
- Will you be maxing out your HSA in 2013?
- Do you see any downsides to HSA’s?