Health Savings Accounts (HSA), a popular component of employee benefit packages with high deductible health plans, offer an abundance of financial advantages for account holders. With tax-free contributions, interest-bearing accounts, and the option to invest, an HSA can be a significant player in an account holder’s financial security.
In 2015, HSA owners can deposit up to $3,350 for individuals and $6,650 for families, tax-free, into their accounts. In addition to the tax-free contributions, HSAs earn tax-free interest. Plus, once the HSA meets a minimum balance, the account holder can invest the money, which can be used like a 401k in retirement years as an income supplement (though it will be taxed if used for non-medical expenses).
HSA Contribution Limits
In the September 2015 issue of Health Insurance Underwriter magazine, Todd Berkley, a leading industry expert and consultant for HSAs, states:
“No other investment vehicle offers the triple tax savings combo of immediate tax relief from income and FICA taxes, tax-free growth and tax-free withdrawals, along with the ability to pass it on to your spouse as a functioning HSA or to any other heir as part of your estate when you die.”
Berkley, citing a study by Devenir Group, goes on to identify a glaring deficiency for HSA account holders. Despite the obvious financial rewards of owning an HSA, only a tiny fraction of all HSA owners – a mere 3% – take advantage of the investing and saving opportunities. The average member of this rare group holds nearly $13,000 in his account, which is nearly 7.5 times larger than the average of all HSA accounts. Clearly this small group of investors have seized the HSA opportunity and are reaping the benefits.
However, Berkley believes that with account growth, market growth, and better education resources, there will be an uptick in HSA owners who decide to utilize the investment option in coming years.
With this in mind, we should ask ourselves the following questions:
- Am I maximizing my annual contributions?
- Does my HSA meet the minimum account threshold for investing?
- Can I afford to forego investing and earning more money?
If you aren’t saving and investing your HSA funds now, it may be time to do so. With DataPath’s HSAToday, account holders have the opportunity to start investing once their account reaches $1,000. Our low threshold beats most other companies, who require their account holders to accrue $2,500 or more before they can start investing.
Login to your account today to see your HSA balance, then contact your administrator to discuss how you can maximize your hard-earned dollars by investing some of the funds in your account. It’s never too late to invest in your future.