Social Security and Health Savings Accounts Explained

Social Security is a vital safety net for millions of Americans, providing a financial foundation for retirement and disability benefits. Eligible workers can contribute to Social Security through payroll taxes, earning a maximum of $147,000 in 2022.

To supplement their Social Security benefits, many people consider opening a Health Savings Account (HSA). An HSA allows individuals to set aside pre-tax dollars for medical expenses, potentially reducing their taxable income.

HSAs are designed for people with high-deductible health plans, which can help lower healthcare costs. By contributing to an HSA, individuals can save for future medical expenses, including deductibles, copays, and prescriptions.

A Health Savings Account (HSA) is a tax-advantaged account that can be used to pay for qualified medical expenses.

With an HSA, you can pay for qualified medical expenses in a tax-advantaged way, including copays, prescriptions, dental care, and more. These expenses are not covered by health insurance.

An HSA is available only to people who choose a high-deductible health insurance plan, which may not be for everyone. High-deductible plans best suit people who are currently healthy, have no ongoing medical issues, and dislike paying more monthly than they have to in premiums.

Here are the key qualifications for enrolling in an HSA:

An HSA is a tax-advantaged account that can be used to pay for qualified medical expenses.

It's "tax-advantaged" because your contributions reduce your taxable income, and the money isn't taxed while it's in the account.

To be eligible to enroll in an HSA, you need to meet certain criteria. You must have a qualifying high-deductible health plan.

Only those with HDHPs qualify for HSA enrollment. You can't be covered by any other type of plan, such as your spouse's.

You must also not be enrolled in Medicare. This is a key requirement for HSA eligibility.

Additionally, you can't be claimed as a dependent on someone else's tax return. This means you need to be financially independent to qualify for an HSA.

There are no income limits associated with contributions to an HSA. This is a significant advantage over other types of retirement accounts, like IRAs and Roth IRAs.

With HSAs, individuals can reap a triple tax benefit. This is a huge advantage, especially when you consider that these funds can be used for medical expenses of individuals and their family members.

You can use HSAs to save money on taxes, and the funds can be used to pay for a wide range of medical expenses. This includes doctor visits, prescriptions, and even some over-the-counter medications.

HSAs are designed to help individuals save for future medical expenses, and the funds can be used to pay for medical expenses of individuals and their family members.

Contributions to a Health Savings Account (HSA) can be made in three ways: through payroll deductions, employer contributions, or personal funds. The contribution limit is adjusted annually for inflation, and for 2024, it's $4,150 for individual coverage and $8,300 for family coverage.

If you're 55 or older, you can make an extra catch-up contribution of $1,000 per year. This can add up over time, as demonstrated by the example in Example 2, where contributing $4,150 per year for 35 years can result in a balance of around $292,000.

To avoid excess contributions, it's essential to keep track of your contributions and ensure they don't exceed the IRS limit. Excess contributions are subject to taxes and an additional six percent excise tax. The IRS limits on contributions and HDHPs are adjusted annually for inflation, and the table below summarizes the limits for 2024 and 2025:

By understanding the contribution limits and rules, you can make the most of your HSA and save for medical expenses in the future.

The contribution limits for Health Savings Accounts (HSAs) are quite straightforward, but it's essential to understand them to make the most of your HSA.

The contribution limit for 2024 is $4,150 for individual coverage and $8,300 for family coverage.

Your employer may also contribute to your HSA, but the total contribution limit remains the same, regardless of how much they put in.

You typically have until the federal tax filing deadline (usually April 15) to contribute to an HSA for the prior tax year.

If you're 55 or older, you can make an extra catch-up contribution of $1,000 per year, which can add up to a significant amount over time.

The contribution limits are adjusted annually for inflation, so the limits for 2025 are $4,300 for self-only coverage and $8,550 for family coverage.

Remember, maxing out your contributions before age 65 can help you save for general retirement expenses beyond medical expenses.

You can contribute to an HSA in three ways: through payroll deductions, employer contributions, or personal contributions.

Employers can make contributions directly to their employees' HSAs, which are not treated as taxable income to the employees.

The amount you can contribute to an HSA is limited based on your months of HSA eligibility and the type of HDHP you have.

There are two types of HDHPs: self-only coverage and family coverage. The contribution limits for 2024 are $4,150 for self-only coverage and $8,300 for family coverage.

For married couples, spouses enrolled in an HDHP cannot have a joint HSA, but each spouse can have a separate HSA and contributions can be allocated between the HSAs.

Individuals aged 55 or over are entitled to an additional catch-up contribution of $1,000.

Here's a summary of the contribution limits for 2024 and 2025:

Excess contributions are subject to taxes, plus an additional six percent excise tax.

To open and manage an HSA, you'll need to follow a few simple steps. First, make sure you're eligible to open an HSA by enrolling in an HSA-eligible health plan, which can be provided by your employer or purchased on your own.

You'll also want to pick a reputable HSA provider that meets your needs, such as offering low-cost funds or automated investing options. Less than 20% of participants invest their HSA assets, so don't forget to set up your investments to save for long-term medical expenses.

To maximize the tax benefits of your HSA, remember that your HSA contributions aren't taxed, your HSA withdrawals for qualified expenses are tax-free, and your HSA funds grow tax-free. This means you can save even more for your future medical needs.

To open an HSA, you'll need to be enrolled in an HSA-eligible health plan. This plan must have a high deductible, but it doesn't have to be provided by your employer.

You can choose an HSA provider that meets your needs, such as investing your HSA with no or low fees. Some providers offer low-cost funds or automated investing options, like robo-advisors.

Don't forget to set up your investments if you want to use your HSA for long-term medical expenses. Less than 20% of HSA participants invest their assets, so don't miss out on this opportunity.

To qualify for an HSA, you'll need to choose a high-deductible health insurance plan. This type of plan is best for people who are currently healthy and have enough savings to cover unexpected medical costs.

Here are the key benefits of enrolling in an HSA:

Your HSA (and the money in it) is yours to keep, no matter what – job change, insurance plan change, or retirement.

You can take advantage of a store partnership that offers discounts on everyday HSA-eligible healthcare expenses.

The HSA Store Partnership provides a convenient online shopping experience for members.

Get members-only discounts on a wide range of products and services, including healthcare essentials and wellness items.

By shopping through the HSA Store Partnership, you can save money on your HSA-eligible expenses.

You can invest your HSA funds in a variety of assets, including mutual funds, ETFs, stocks, or fixed income, depending on what your plan offers and your risk tolerance and time horizon.

Time is a key factor in taking full advantage of the investment growth potential of an HSA, especially in your 20s and 30s when time is one of your greatest assets.

Your investment strategy for an HSA should be similar to the one you're using for your other retirement assets, such as a 401(k) plan or an IRA.

Make sure to consider your portfolio as a whole so your overall diversification strategy and risk profile are where you want them to be.

Some administrators only let you put your money in a savings account, where you'll barely earn any interest, so shop around for a plan with high-quality, low-cost investment options, such as Vanguard or Fidelity funds.

Tax-free investment earnings are a benefit of HSAs, meaning the investment earnings inside the account are not subject to income taxes while held in the account.

If the investment earnings are withdrawn to pay for medical expenses, they are never taxed.

The IRS limits on contributions and HDHPs are adjusted annually for inflation, and the chart below summarizes the limits for 2024 and 2025:

Consider your employer's contribution options and how they can impact your HSA balance over time.

Remember, the account holder is responsible for ensuring that the contribution limit is not exceeded, and excess contributions are subject to taxes, plus an additional six percent excise tax.

Using your Health Savings Account (HSA) can be a game-changer for your finances in retirement. You can pay for qualified medical expenses in a tax-advantaged way with an HSA.

With an HSA, you can triple your tax savings by not paying taxes on contributions, withdrawals for qualified expenses, and having funds grow tax-free. You also own your HSA and the money in it, keeping it no matter what - job change, insurance plan change, or retirement.

Here are some qualified medical expenses you can pay for with your HSA:

You can use your HSA balance to pay for in-home nursing care, retirement community fees for lifetime care, long-term care services, nursing home fees, and meals and lodging that are necessary while obtaining medical care away from home.

You can pay for qualified medical expenses using your Health Savings Account (HSA) in a variety of convenient ways.

Use your Associated Bank HSA debit card to make payments directly. You can also use your ATM to withdraw cash for medical expenses. Another option is to set up direct deposit to transfer funds from your HSA to your bank account for payments. If you prefer, you can also use online bill pay to pay for qualified expenses.

You can pay for a wide range of qualified medical expenses, including office-visit copayments, health insurance deductibles, and dental expenses. Some examples of qualified expenses include:

You can use your Health Savings Account (HSA) to pay for qualified medical expenses in a tax-advantaged way. With an HSA, you can pay for expenses such as office-visit copayments, health insurance deductibles, dental expenses, vision care, and prescription drugs, among others.

One of the best uses for HSA funds in retirement is to pay for health care expenses, since qualified withdrawals are tax-free. You can use your HSA balance to pay for in-home nursing care, retirement community fees for lifetime care, and other long-term care services.

There are no restrictions on how you can use your HSA balance to reimburse yourself for medical expenses, as long as you have receipts for the expenses incurred after you established the account. You can use your HSA debit card, ATM, direct deposit, or online bill pay for any HSA-qualified expense.

Here are some examples of qualified medical expenses that can be paid for with HSA funds:

It's worth noting that there are limitations on how much you can pay tax-free for long-term care insurance based on your age.

Tax planning tips are crucial when it comes to maximizing the benefits of a health savings account (HSA). Contributions to an HSA are tax-deductible, even if you don't itemize your taxes.

You can contribute the maximum allowed amount to the HSA each year, which is $4,150 for individuals and $8,300 for families in 2024. Consider contributing enough to the HSA to receive the full employer matching contribution, if any, and then contribute up to the maximum in the HSA before making further contributions to the 401(k).

Contribute the maximum allowed amount to the HSA each year, which is $4,150 for individuals and $8,300 for families in 2024. This will help you take advantage of the triple tax benefit of HSAs: tax-free contributions, tax-free investment earnings, and tax-free distributions for qualified medical expenses.

If under age 65, only take distributions from the HSA for qualified medical expenses so that the distributions are exempt from tax and the additional 20 percent penalty. If over age 65, the additional 20 percent penalty no longer applies, so distributions taken for nonqualified medical expenses are only subject to normal income taxes.

To maximize the tax benefits of HSAs, consider the following tax planning tips:

If you have a Health Savings Account (HSA), it's a good idea to contribute the maximum allowed amount each year to maximize the tax benefits.

Contributing to an HSA can be a smart move, especially when combined with a 401(k)-retirement plan. Consider contributing enough to each arrangement to receive the full employer matching contribution, and then contribute up to the maximum in the HSA before making further contributions to the 401(k).

Only HSA contributions have the added benefit of being exempt from Social Security and Medicare (FICA) taxes, generating an additional immediate tax savings.

You should leave HSA dollars in the account to grow tax-free and pay current medical expenses with other funds. This way, you can delay taking distributions from the account and invest for the long-term to take advantage of potentially higher investment returns.

If you're under age 65, only take distributions from the HSA for qualified medical expenses so that the distributions are exempt from tax and the additional 20 percent penalty.

Here are some key tax planning tips to keep in mind:

Distributions taken after age 65 for qualified medical expenses are still tax-free, so be sure to save records of all qualified medical expenses for future reference.