The end of 2024 is approaching fast, and that means the holidays are right around the corner! If you’re looking to prioritize long-term financial health, maxing out your HSA before the end of the year sneaks up on you might be a wise decision.

When it comes to saving for healthcare expenses, a Health Savings Account (HSA) stands out as one of the best tools available. Here’s a rundown on why maxing out your HSA can be a smart move for your health and your wallet, along with the 2024 contribution limits so you know how much you need to invest to catch up before the year’s end!

Triple Tax Advantage
One of the most compelling reasons to max out your HSA is its triple tax advantage:

Tax-Deductible Contributions: Contributions to your HSA are tax-deductible, which means you can reduce your taxable income for the year. These immediate tax savings can be significant, especially if you are in a higher tax bracket.

Tax-Free Growth: The funds in your HSA grow tax-free. Any interest or investment earnings you accumulate over time are not subject to taxes, allowing your savings to compound more efficiently.

Tax-Free Withdrawals: Withdrawals from your HSA for qualified medical expenses are also tax-free. This includes a wide range of expenses, from doctor visits and prescription medications to dental and vision care.

Flexibility and Control
Unlike Flexible Spending Accounts (FSAs), which typically have a “use-it-or-lose-it” policy, the funds in your HSA roll over from year to year. This means you can accumulate savings over time without the pressure to spend them by a certain deadline.

Long-Term Savings Potential
Maxing out your HSA contributions can also serve as a powerful long-term savings strategy. As healthcare costs continue to rise, having a robust HSA can provide peace of mind and financial security. Additionally, once you reach age 65, you can use HSA funds for non-medical expenses without penalties, though those withdrawals will be subject to regular income tax. This flexibility allows your HSA to function similarly to a traditional retirement account if needed.

Lower Premiums with High Deductible Health Plans (HDHPs)
To be eligible for an HSA, you must be enrolled in a High Deductible Health Plan (HDHP). While HDHPs generally have higher deductibles and lower premiums, the savings on premiums can be redirected into your HSA. By maxing out your HSA contributions, you can effectively balance the higher out-of-pocket costs associated with HDHPs and still come out ahead financially.

Planning for the Unexpected
Healthcare expenses can be unpredictable. An HSA provides a financial cushion for unexpected medical costs. Whether it’s an emergency room visit, an unplanned surgery, or ongoing treatments, having a well-funded HSA can alleviate the financial strain and help you focus on your health and recovery.

Contribution Limits
For 2024, the IRS has set the HSA contribution limits at $4,150 for individual coverage and $8,300 for family coverage. Additionally, individuals aged 55 and older can make an extra $1,000 catch-up contribution. Maxing out these contributions each year can significantly enhance your savings potential and provide substantial tax benefits.

Maximizing your HSA contributions is a smart financial move that offers immediate tax benefits, long-term growth potential, and flexibility in managing healthcare expenses. At Ascend, we’re here to help you navigate your financial journey and make the most of your HSA. If you have any questions or need assistance, give us a call at 800-342-3086 or head to one of our Middle Tennessee locations to meet with one of our financial experts. Start maximizing your HSA today and secure a healthier financial future with Ascend!