Be an HSA Super Saver

Health care is likely one of your biggest expenses today, and with health care costs on the rise, concerns about being able to afford medical services and supplies will likely continue in the years ahead. In fact, 61% of pre-retirees worry about having enough money to pay for health care in retirement.1 That’s why it’s essential to think about becoming a Health Savings Account (HSA) Super Saver now.

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The perks of being an HSA Super Saver

Take charge of your health care costs

Contributing to your HSA provides you the flexibility to pay for health care expenses today and build your account so you’re prepared for medical expenses you might incur any time in the future, including retirement.

Benefit from potential tax savings2

HSA contributions, interest, investment earnings and withdrawals are federal income tax-free, which can help your balance accumulate over time and maximize your buying power for health care.

5 tips to help you become an HSA Super Saver

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Contribute to your HSA through payroll deductions

When you contribute to your HSA through payroll deductions, your contributions are exempt from federal and FICA taxes3—meaning you’ll keep more of your paycheck in your pocket. With a federal tax rate of 20%, for example, and a 7.65% FICA tax, you can get an idea of how much you can save on taxes each paycheck and your total savings at the end of the year.

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Find out more about HSA contributions.

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Maximize your contributions

Try to contribute up to your HSA’s maximum annual contribution limit to take full advantage of potential tax benefits and to give your account the chance to grow for the future. If you can’t contribute the maximum amount, set a goal to gradually increase your contribution each year.

Get tips on how to determine a contribution amount that works for you.

If you are turning 55 or older this year, consider taking advantage of the $1,000 catch-up contribution.

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Take advantage of HSA investing for potential tax-free account growth

Did you know your HSA comes with an investment feature? Investing a portion of your HSA balance in mutual funds provides the potential for compounding returns—which could add up to thousands of dollars in potential tax-free earnings and account growth over time.

See the long-term impact of HSA investing.

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Make your HSA part of your retirement savings strategy

As you think about planning for retirement, consider a strategy of saving into not only one, but two tax advantaged accounts: a 401(k) account and an HSA. With this strategy, you can use your HSA to pay for qualified health care expenses in retirement—potentially saving a substantial sum on federal taxes on those withdrawals—and allowing you to use money in your 401(k) account for other retirement expenses.

Understand how your HSA and 401(k) can work together to help you boost your retirement savings.

A couple retiring today can expect to spend $351,000 on health care in retirement.4

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Contribute to both an HSA and an LPFSA to maximize tax savings

Some employers offer a Limited Purpose Flexible Spending Account (LPFSA)—a reimbursement account that lets you set aside pre-tax dollars to pay for qualified dental and vision expenses. Using an LPFSA to pay for this year’s qualified dental and vision expenses means you won’t have to tap into your HSA for those expenses, allowing your balance to accumulate year over year.

Watch this video to see how James pairs an HSA with an LPFSA to pay for braces.

Take the first step to becoming a Super Saver today!

Now that you have a better understanding of how an HSA can be a valuable tax-advantaged tool in helping you pay for health care expenses now and in the future, it’s time to get started on the path to becoming an HSA Super Saver. Consider increasing your monthly contribution—even by a small amount—so you can maximize your tax benefits while building your balance. You can do this on your employer’s benefits site, or by making a contribution directly to your account on the member website.

1Society of Actuaries Research Institute Retirement Risk Survey, 2022.
2Potential Tax Advantages: You can receive federal income tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. Any interest or earnings on the assets in the account are federal income tax-free. 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, unless an exception applies. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA directly (not through payroll deductions). In addition, HSA contributions may reduce your state income taxes in certain states. Certain limits may apply to employees who are considered highly compensated employees. Bank of America recommends you contact qualified tax or legal counsel before establishing an HSA.
3Pre-tax payroll contributions to your HSA may be exempt from federal and most state taxes or you may be able to claim a tax deduction for after-tax contributions you, or someone other than your employer, make to your HSA, as long as you continue to be an eligible individual. Eligibility is defined by IRS Code 223 and is described in your Bank of America Health Savings Account Custodial Agreement and Disclosure Statement, which includes maintaining coverage under a qualifying high deductible health plan.
4Employee Benefits Research Institute, Issue Brief, no. 599, January 18, 2024. A 65-year-old couple, both with median drug expenses needs $351,000 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 2020. A 65-year-old man needs $184,000 or a 65-year-old woman would need $217,000 to have to have a 90% chance of having enough money to cover health care expenses (excluding long-term care) in retirement.
Investing involves risks. There is always the potential of losing money when you invest in securities.
Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions. This material should be regarded as general information on health care considerations and is not intended to provide specific health care advice.