Up your HSA game!
It’s a way to spend less on health care. A retirement-savings tool. An investing resource. Let’s face it: The Health Savings Account (HSA) is basically the Swiss army knife of financial benefits. But just because you have an HSA doesn’t mean you’re using it to its full potential. Here are some handy tips to help you make the most of the HSA’s many powers.
1. Contribute as much as you can.
One of the HSA’s greatest features is that all contributions are tax-free. That includes Lenovo’s annual contribution ($750 if you’re single or $1,500 if you have a family). Plus, there’s no use-it-or-lose-it rule — HSA funds roll over from year to year. That means you can stash away a whole lot of your money without paying one cent in taxes. And even the interest you earn is tax-free! So obviously, the more you contribute, the better. Just keep in mind that the IRS does impose some limits: In 2024, the annual max for your and Lenovo’s combined contributions is $4,150 (single) or $8,300 (family). If you’re 55 or older, you can save an additional $1,000 per year in catch-up contributions.
Bump it up!
You can increase (or decrease) your HSA contribution amount at any time. Just log in to Benefitsolver and click Change My Benefits.
2. Spend your HSA dollars wisely.
Sure, the HSA is an account to help you save money on your health care. Hence the name: Health Savings Account. In fact, one of its many great features is that you can withdraw money for qualified health care expenses tax-free. But if your primary goal in having an HSA is to save for your future, you may want to consider paying out of pocket for the majority of your routine health care expenses. That way, the interest can keep compounding and your balance can keep growing. Plus, you’ll have a robust reserve to draw from if a major medical expense ever rears its ugly head.
Save your receipts!
Needing a quick infusion of cash? If you paid for health care expenses out of pocket in the past, you can get reimbursed for those expenses through your HSA now — as long as you have your receipts and as long as you were enrolled in the HSA at the time the expenses were incurred.
3. Invest some of your funds.
Just by setting aside a portion of your income tax-free and letting it build interest (again, tax-free), you’re already making huge strides toward building a healthy retirement savings fund. But you can take your HSA to the next level by investing the portion of your HSA balance that you’re not using for medical expenses.
Get investing guidance
Interested in investing some of your HSA funds but not sure where to start? A Fidelity financial advisor can help set you on the right path.
4. Hold off on using your HSA for nonqualified expenses.
All kinds of health care expenses are HSA-eligible, from doctor and hospital visits and prescription drugs to dental and vision exams and acupuncture treatments. But if you use your HSA for nonqualified expenses, those withdrawals will be taxed as income and subject to a 20% penalty. Ouch! Once you hit 65, that penalty goes away and you’ll be able to use your HSA to pay for most health-related expenses. Aromatherapy, here you come!
See what’s eligible
Wondering if you can pay for a certain health care expense with your HSA? Check out the full eligibility list provided by the IRS.
Here’s how much you could be saving
Let’s take John’s example:
John is 60 and preparing for retirement. He contributed the maximum amount allowed by the IRS, including catch-up contributions, over the past five years, here’s what his HSA balance and tax savings look like.*
Total contributions
$39,500
over the past five years
Tax savings
$14,870
over the past five years
* Contributions are based on IRS contribution limits for family coverage from 2016–2020 and include catch-up contributions. Tax savings assumes a 25% federal tax rate, 5% state tax rate and 7.65% FICA.