A Health Savings Account (HSA) can be a good savings tool. And just like any tool, it helps to know how to use it the right way. Here are some common HSA mistakes you should avoid. Dodge these pitfalls and you’ll be making the most out of what can be an incredibly valuable account.
Not knowing your limits
You should max out your HSA contributions if you can, and you can only do that if you know what the limits are. Just like a 401(k) or an IRA max contribution can change every year, so can your HSA max. As USA Today notes, the max HSA contributions for this year are as follows:
- Individual under 55: $3,650. Individual over 55: $4,650
- Family under 55: $7,300. Family over 55: $8,300
Remember any employer match for an HSA counts toward your max limit.
Contributing once you have Medicare
It’s important to stop making HSA contributions once you enroll in Medicare. If you keep contributing, you could get hit with expensive tax penalties.
Spending your HSA funds early
Like any retirement savings tool, you’ll get the most out of your HSA if you can wait as long as possible to start spending your funds. In the interim, they should be invested. While it might be tempting to use your HSA to pay for medical costs now, if you can wait, you’ll be glad you did. HSA gains are tax-free, which means you’ll have a lot more money down the line if you can hold out.