How much should I put in my HSA?

An HSA can help you save for health care costs in the current year or anytime in the future. Try to think ahead to how much you may need this year, plus what you can afford to set aside for longer-term needs. Let’s take a look at some considerations that can help you calculate a contribution strategy to fit your needs.

  1. Max out your contributions if you can

    If you’re able, consider contributing the maximum allowed by the IRS. The more you can contribute, the more you can benefit from the HSA’s triple tax advantages1 to help build your balance for the future. Keep in mind: You don’t lose any unspent funds at the end of the year. All remaining funds roll over to the next year and can potentially keep growing.

  2. Consider saving the difference between premiums

    If your employer offers both a traditional health plan and a high-deductible health plan (HDHP), one approach might be to save the difference in premiums. For example, let’s say the monthly premium for the traditional plan is $450 and $200 for the HDHP. Consider opting for the HDHP plan so that you can set aside the $250 difference each month in your HSA – and in a year’s time, you’ll have contributed $3,000.

  3. Save at least the amount of your deductible

    You'll be responsible for meeting your out-of pocket deductible expenses, so consider contributing at least the amount of your deductible. If you think you could have health care expenses beyond your deductible, try to bump up your contribution to include that amount if you can.

  4. Calculate what may work best for your situation

    Try our HSA calculator using your own numbers to see the impact to your account over time.

Developing a long-term strategy

Planning with your HSA today can help you be prepared for your health care needs tomorrow. Here are some additional considerations to help you strategize how to use your HSA over the long term.

Keep some in cash, invest the rest. Take advantage of the opportunity for federal tax-free earning potential by saving and investing your HSA funds. You can set up your investment account at any time. Start by defining your investment threshold, the minimum amount you need in your account before being able to invest, then when your account reaches that level funds will automatically transfer between cash and investments. It’s a good idea to revisit your cash-versus-investment approach periodically. You can always make adjustments to your contributions and investment mix to meet your needs.

Chart showing the potential impact on HSA balance over 20 years with additional monthly savings of $50, $100 or $250. When saving an additional $50, there is potential for the account balance to grow to $20,373 over 20 years; with $100 additional savings, the balance could reach $40,746 over that time; and with $250, the impact on the balance could be $101,864. All calculations assume a 5% rate of return.

These scenarios assume a 5% rate of return over 20 years and a monthly expense of $100. A monthly contribution of $150, minus a $100 for expenses equals a net savings of $50 per month and assumes a potential savings of $20,373 for 20 years. A monthly contribution of $200, minus a $100 for expenses equals a net savings of $100 per month and assumes a potential savings of $40,746 for 20 years. A monthly contribution of $350, minus a $100 for expenses equals a net savings of $250 per month and assumes a potential savings of $101,864 for 20 years.

Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Assumes an incremental net monthly contribution (total contributions minus total withdrawals) for 20 years with a 5% rate of return. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than original cost.

Be realistic about what you will need in retirement. Here’s a quick reality check: Studies have shown that a couple retiring at age 65 may need $296,0002 to cover out-of-pocket medical expenses during retirement. The good news is that you can use your HSA’s triple tax advantages to help you stretch your retirement savings further. Keep this number in mind as an overall savings goal as you manage your HSA each year. Using our HSA calculator can help you see if you’re on track.

Keep going, keep saving. Life happens, needs change and goals evolve. However you can be prepared by continuing to contribute to your HSA – and consider increasing your contribution amount to help you prepare for future qualified health care expenses. By saving the money you put in your account, you can make the most of your HSA’s potential triple tax advantages "1 and the potential to grow your account's balance year after year.

1 About Triple Tax Advantages: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax-free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA. We recommend you contact qualified tax or legal counsel before establishing an HSA.
2 Source: Employee Benefits Research Institute, Issue Brief, no. 549, January 20, 2022. A 65-year-old couple, both with median drug expenses needs $296,000 to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement. Savings needed for Medigap Premiums, Medicare Part B Premiums, Medicare Part D Premiums and Out-of-Pocket Drug Expenses for Retirement at age 65 in 2019.