Healthcare is a major expense for a lot of people during their working years. And often, it becomes an even more burdensome expense during retirement.
That’s why it’s so important to set funds aside for future healthcare costs. And health savings accounts (HSAs) are a great bet in that regard.
HSAs allow you to set aside money for near- and long-term medical costs. Unlike flexible spending accounts (FSAs), HSA funds never expire, which is why HSAs are often regarded as a retirement-savings tool – even though you can access money in one of these accounts well ahead of retirement.
What makes HSAs so unique is that they’re triple tax-advantaged. Contributions are made with tax-free dollars, and money that isn’t withdrawn from an HSA can be invested for added growth. Those gains are then tax-free, as are withdrawals, provided they’re used for qualified medical expenses.
Like IRAs and 401(k) plans, the annual contribution limits for HSAs can change based on factors such as inflation. And come 2023, HSA savers will get the option to contribute more money to their accounts.
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HSA limits are rising
The amount of money you can contribute to an HSA depends on whether you’re saving as an individual or at the family level. If you have self-only coverage, you can currently contribute $3,650 to an HSA. Come 2023, that limit will increase to $3,850.
If you have family-level coverage, you can currently contribute $7,300 to an HSA. Come 2023, that limit will rise to $7,750.
It’s also worth noting that savers 55 and over are eligible for a $1,000 catch-up HSA contribution on top of the aforementioned figures. These are similar to the catch-up contributions older savers can make in IRAs or 401(k)s.
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Eligibility is changing, too
Not everyone is able to fund an HSA. To be eligible, you must be enrolled in a high-deductible health insurance plan. And the definition of that is changing in 2023, as well.
This year, you can qualify for an HSA with a minimum deductible of $1,400 for self-only coverage and $2,800 for family-level coverage. Next year, those minimums are increasing to $1,500 and $3,000, respectively.
Meanwhile, the current out-of-pocket maximums for HSAs are $7,050 for self-only coverage and $14,100 for family-level coverage. In 2023, these are increasing to $7,500 and $15,000, respectively.
It’s important to review your plan details and make sure you’re still able to participate in an HSA. Eligibly one year doesn’t automatically guarantee the same thing for the following year.
However, if you are eligible to fund an HSA in 2023, it really pays to do so. The money you set aside could grow into a much larger sum over time, making it possible to cover your senior healthcare costs without worry.
Many retirees find that healthcare is actually their greatest monthly expense – even more so than housing. So the more money you’re able to bring into retirement to pay for medical costs, the less stress you’re apt to have during your senior years.
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