Opening a health savings account (HSA) now can help you enjoy a comfortable retirement. How?
To enroll in an HSA, you must have health coverage through a high-deductible health plan.
The Employee Benefit Research Institute (EBRI) recently noted that “a person contributing for 40 years to an HSA could save up to $360,000 if the rate of return was 2.5 percent, $600,000 if the rate of return was 5 percent, and nearly $1.1 million if the rate of return was 7.5 percent…”
This scenario assumes that you make no withdrawals from your HSA before retirement—something many people cannot afford to do. Still, EBRI reported that account balances typically increase with the age of the account owner. At the end of 2013, account balances averaged $697 for owners under age 25, while owners ages 65 and up had an average of $4,460. Since HSAs have only been around for 10 years, younger individuals who start saving today can build significant savings.
Contribution limits for HSAs adjust every year for inflation. For 2015, you can contribute up to the following amounts into an HSA:
- For individuals with self-only health insurance coverage: $3,350.
- For those with family health insurance coverage: $6,650.
- For individuals age 55+: You can make an additional $1,000 “catch-up” contribution.
You may also contribute to a health insurance account for a family member. You, your employer or both may contribute to your HSA. The one limit applies to contributions from all sources. However, individuals age 55 and older must have their own HSA to make the catch-up contribution.
To enroll in an HSA, you must have health coverage through a high-deductible health plan. For 2015, these plans must have a deductible of at least $1,300 for self-only coverage, and $2,600 for family coverage. You cannot contribute to an HSA if you have Medicare. You CAN use your accumulated HSA funds to pay medical expenses after you enroll in Medicare, however.
Leave a Reply