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How much should you contribute to your HSA?
Are you contributing enough to your Health Savings Account (HSA) each year? While figuring this out may seem complicated, there are several strategies to consider when deciding how much to contribute to your account. Keep reading to learn more about benefits of each option. Every year the International Revenue Support (IRS) sets limits on HSA contributions, which are adjusted for inflation each year. The 2021 limits for employee-only coverage is a $3,600 annual contribution, and for family coverage the annual HSA contribution limit is $7,200. For those age 55 or older, an extra $1,000 “catch-up” contribution amount is permitted. Here are some options to consider when choosing how much to contribute to your HSA:
How much to contribute
Details
Benefits
Annual contribution limit
For 2021, the maximum individuals can contribute is $3,600 and $7,200 for families.
Your medical insurance deductible
This amount is how much you pay toward your health care bills before health insurance begins to cover it. Your HSA can help cover these costs. This is the most you can spend on health care expenses from your own pocket before your health plan covers everything. This includes your deductible and copay or coinsurance.
Contributing the maximum amount will help lower your taxable income and gives you the most tax-free interest on your account. Covering your deductible will help create an adequate budget to cover your initial out of pocket health care costs. This will help you be prepared for the “worst-case-scenario.” If you don’t use all the money in your HSA, the money will roll over to the next year.
Out-of-pocket maximum up to the annual contribution limit
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Column Provided by: Tom Sledge, Arkansas State Manager, American Fidelity Assurance Co.
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