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HSA investment and financial strategies

Make your HSA funds even more effective with these 5 considerations.

Health savings accounts (HSAs) were created to give Americans a tax-free way to save for medical costs such as insurance deductibles, dental work and vision care. But many people don’t realize that these accounts can also be a powerful financial tool for saving and investing. But how do you determine what an HSA can be used for?

Here’s what you need to know to make the most of your HSA investment option.

  • Determine your eligibility. To contribute to an HSA, you must have a high-deductible health plan (HDHP). In 2019, this was defined as having a minimum annual deductible of $1,350 ($2,700 for family plans) and a maximum out-of-pocket expense of $6,650 ($13,500 for family plans).footnote [1]
  • Understand contributions. The maximum contribution for 2019 is $3,500 ($7,000 for family coverage), but you can contribute an extra $1,000 if you’ll be 55 or older at any point during the year. If your employer contributes to your HSA, that counts toward the limit.
  • Consider whether or not you need to use the HSA for medical expenses. Of course, you can use your pre-tax HSA money to cover qualified medical expenses. If your tax rate is 25 percent and you use your HSA to pay a $100 emergency room co-pay, it’s really like paying only $75 in after-tax money. But you may want to think about covering your medical expenses out-of-pocket if you can afford to do so and leaving your HSA fund to grow.
return to reference[1] IRS.gov Publication on Health Savings Accounts and Other Tax-Favored Health Plans

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