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health savings account

Q&A: Health savings account rules

October 10, 2022 By Liz Weston

Dear Liz: I established a health savings account when I was self-employed using an HSA-compliant healthcare plan. Now I am employed. My employer does not offer a health plan that was designated as an HSA, but my deductible is $7,000, higher than the minimum for an individual. Can I continue to contribute to my existing HSA?

Answer: Unfortunately, no. To contribute to an HSA, you must be covered by an HSA-compliant high-deductible healthcare plan, and you may not be covered by other health insurance, including Medicare.

HSAs were created as a way to encourage people to choose high-deductible health insurance plans, but many people use them as an additional way to save for retirement. HSAs have a rare triple tax break: contributions are pretax, the account can grow tax deferred and withdrawals are tax free if used to pay qualifying healthcare expenses.

Unlike flexible spending accounts, which are “use it or lose it,” HSAs allow people to roll unused balances over from year to year. Plus, balances can be invested for long-term growth. Many people value these tax advantages so highly that they pay medical expenses out of pocket, leaving their HSA balances to grow for the future.

But HSA-compliant health insurance policies must meet certain criteria, including a minimum deductible of $1,400 for individuals and $2,800 for families for 2022. (The average deductible in 2021 was $2,349 for individuals and $5,217 for families, according to KFF, the healthcare research organization formerly known as the Kaiser Family Foundation.) The maximum out-of-pocket limit — including deductibles and co-pays, but not premiums — is $7,050 for individuals or $14,100 for families in 2022.

As you can see, you’ve wound up with the worst of both worlds: a very high deductible with no option to save in an HSA. Perhaps your employer is compensating you so handsomely in other areas that you can overlook this deficit in your benefits. If not, it might be time to look for an employer who can offer more.

Filed Under: Q&A Tagged With: health savings account, HSA

Thursday’s need-to-know money news

June 24, 2021 By Liz Weston

Today’s top story: How to harness your HSA’s superpowers. Also in the news: A scam alerts on the Child Tax Credit, how to avoid costly home selling mistakes, and in a hot used-car market, used electric cars can be a deal.

How to Harness Your HSA’s Superpowers
A health savings account can help you supercharge your savings with big tax advantages for you and your kids.

Scam Alert: Child Tax Credit Is Automatic; No Need to Apply
The IRS won’t call, text or email you so beware of unsolicited communications.

The Property Line: Avoid These Costly Home Selling Mistakes
Here’s how to avoid home selling mistakes that could slow the process, cause frustration and cost you money.

In This Hot Used Car Market, Used Plug-Ins Can Be a Deal
With used car prices up dramatically and gas prices peaking, older plug-in vehicles might be a good deal for some.

Filed Under: Liz's Blog Tagged With: child tax credit, electric cars, health savings account, home selling mistakes, HSA, scam alert, tips

How to harness your HSA’s superpowers

June 23, 2021 By Liz Weston

If you have a high-deductible health insurance plan, a health savings account can help you pay your medical bills. But HSAs have hidden superpowers that make them a great way for some people to create a tax-free pot of money for retirement or other long-term goals. In the right circumstances, you can even use an HSA to help your young adult children start saving for their futures. In my latest for the Associated Press, find out if a high-deductible health insurance plan is right for you.

Filed Under: Liz's Blog Tagged With: health insurane, health savings account

Friday’s need-to-know money news

June 12, 2020 By Liz Weston

Today’s top story: How to stand out in a tough job market. Also in the news: 3 ways to skip your bank’s long phone lines, how a temporary relocation during the pandemic may affect your taxes, and new HSA rules.

How to Stand Out in a Tough Job Market
A message for the Class of 2020.

3 Ways to Skip Your Bank’s Long Phone Lines
Don’t sit on hold forever.

How Will a Temporary Relocation During the Pandemic Affect Your Taxes?
You may be required to file twice.

New HSA Account Rules
New rules make HSAs even more valuable.

Filed Under: Liz's Blog Tagged With: banking, class of 2020, health savings account, HSA, job hunting, pandemic, relocation, resumes, Taxes, tips

Thursday’s need-to-know money news

May 21, 2020 By Liz Weston

Today’s top story: Should seniors consider a reverse mortgage now? Also in the news: Make the most of these store cards during a crisis, financial experts say a recession could be looming, and why you should think of your HSA as an extension of your emergency fund.

Should Seniors Consider a Reverse Mortgage Now?
Reverse mortgages offer tax-free cash for home equity, but understand how they work and explore alternatives.

Make the Most of These Store Cards During a Crisis
Some of the best cards to optimize your budget.

Financial experts say a recession could be looming; here’s how you can prepare
Be proactive.

Think of Your HSA as an Extension of Your Emergency Fund
Your contributions can increase in 2021.

Filed Under: Liz's Blog Tagged With: emergency fund, health savings account, HSA, recession, reverse mortgage, store credit cards, tips

Wednesday’s need-to-know money news

May 8, 2019 By Liz Weston

Today’s top story: When can I retire? Also in the news: How to get your own royal family photos at commoner prices, how to make the most of your HSA, and how living in one of these cities means you could pay your student debt off sooner.

When Can I Retire?
How to determine the right time.

Get Your Own ‘Royal’ Family Photos at Commoner Prices
You don’t need a castle.

How to make the most of your HSA — for now, and the future
Protecting your health costs.

Living in one of these cities means you could pay your student debt off quicker, study says
Cost of living can make a big difference.

Filed Under: Liz's Blog Tagged With: family photos, health savings account, HSA, Retirement, royal family, student debt, Student Loans

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