health savings account (HSA)

Maximizing your HSA Contributions



If you have the means to do so, contributing the maximum to your HSA account is an excellent idea. There are several reasons for this. Not only do health savings accounts allow you to save money for medical expenses in the future, but they’re also a tax-deferred investment vehicle. Some important things to understand about maximizing your contributions include:

  • If you didn’t hit your maximum contribution limit in any given year, you have the ability to make up the difference until April 15th.
  • Once you’re 55 years old, you have the ability to make “catch up contributions,” which essentially allows you to contribute $1,000 more a year than what your maximum was previously. This allows you to make up for contributions you might not have been able to make while you were younger.
  • There’s no such thing as a joint account. If you want to truly maximize the amount you can save and take advantage of something like the ability to make catch up contributions, both you and your spouse must have a Health Savings Account.

When it comes to maximizing your HSA contributions, the younger you begin, the better. And as we’re going to discuss next, your HSA can act as an incredibly valuable retirement tool. The more you have available to you through maximizing your contributions, the more security it will provide you during retirement.

Using an HSA for Retirement Planning

Your health savings account can be an incredibly valuable tool for retirement planning. Of course, having financial security if you have any major health needs down the road is valuable, but the benefits go beyond that. Some of the reasons an HSA should be utilized for retirement planning include:

  • Your HSA is a tax deferred account, similar to a 401k or an IRA. But unlike these common retirement accounts, a health savings account isn’t tied to your income level. This means you’re your deduction won’t be phased out like a traditional IRA contribution can be.
  • Like other retirement accounts, the money in your HSA can be invested and grow tax deferred.
  • Once you reach the age of 65, you’re free to take money from your HSA to pay for non-medical expenses without penalty. You will pay taxes on that money, where for medical use you wouldn’t, but there’s no additional penalty.

Building up your HSA is a great idea no matter what, but if you’re maximizing what you can do with your other retirement accounts, it has the additional benefit of being another tool at your disposal in retirement planning.

Strategic Distribution Timing

Another great thing about an HSA is that you can use it to reimburse yourself months or even years after you’ve incurred a medical expense. Why would you want to wait? If you’re able to pay for any medical expense out of pocket at the time it occurs, the money in your HSA essentially becomes a rainy day fund.

For example, if you pay for $10,000 dollars of medical expenses out of pocket over a five-year span without tapping into your HSA, you have the ability to take that money out whenever you’d like. If your car breaks down, you can reimburse yourself that $10,000. If you want to apply it toward your child’s college, you can do that.

Because you paid the medical expenses yourself, you can tap into your HSA for that money whenever it makes sense for you. An important thing to know if you do plan to use this method is that you need the documentation to prove that you did in fact pay those medical expenses. So make sure you’re very organized and keep track of anything you’ll want to be reimbursed for in the future.

HSAs are very versatile and provide you financial security in different ways. They’re portable, so they go with you no matter where you work, they don’t expire so you can keep growing your account for the future, and you can even cover dependents who aren’t on your insurance. There are plenty of good reasons to start building up your health savings account.  If you are eligible for an HSA you should consider taking advantage of this unique tool.

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Kelly Martinson is a Tax Shareholder at Lutz with over 22 years of experience in taxation. She primarily focuses on providing corporate and individual tax consulting and compliance services to clients in various industries.

  • American Institute of Certified Public Accountants, Member
  • Nebraska Society of Certified Public Accountants, Member, Board of Directors, Secretary
  • Accounting & Financial Women’s Alliance, Omaha Chapter, Member, Past President
  • Pension Council of the Midlands, Member, Treasurer
  • American Society of Pension Professionals and Actuaries, Member
  • Certified Public Accountant
  • BS in Accounting, Finance, Information Management, with Highest Distinction, Dana College, Blair, NE
  • Executive Women’s Golf Association - Omaha Chapter, Past President, Past Treasurer, Member
  • Lutheran Church of the Master, Past Church Council, Past Nominating Committee, Past Treasurer, Past Stewardship Committee Member
  • Foundation of the Master, Board of Directors


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