If you’re like most, at the start of every New Year, you pull out that infamous list of healthy resolutions: eat better, exercise more, stress less. While it’s imperative to strive for improved physical and mental health, what about your financial health?
The New Year is an optimal time to create plans to contribute and invest in your health savings account (HSA).
“By taking that first step in 2020, you’re setting the stage for the rest of the year,” said Joe Firnstahl, Senior Product Manager at Optum Bank. “And, even if you didn’t max out your HSA in 2019, believe it or not, you still have time.”
An HSA is designed to work with a qualifying high-deductible health plan (HDHP). It is one of the single best tax-advantaged individual bank accounts to save and pay for qualified medical expenses. It’s like an IRA for health; but unlike an IRA, you can use the money now for qualified medical expenses or in retirement. And, if you are age 65 or older, you may use HSA funds for non-qualified medical expenses or Medicare premiums. You can even choose to invest part of your HSA funds in mutual funds or other investments to potentially further grow your retirement savings income tax free.
Here’s what you can do today to take full advantage of these income tax free savings in 2020.
Check your HSA Balance
How are you meeting your savings goals? If you are unsure of what you should be saving, the Health Savings Checkup tool is an easy way to help estimate the health care costs you may need during retirement. You can also learn about actions you may take that help lower your costs. Your personalized estimate will only take a few minutes to complete.
Reach the IRS Contribution Limit
Did you know that you may gain more in tax savings if you contribute the annual maximum amount to your HSA? The IRS annual contribution limits for 2020 are $3,550 for individual coverage and $7,100 for family coverage.
If you didn’t max out your HSA in 2019, you can still contribute up to the IRS limits by your federal tax return date, which is April 15 for most people. If you are not sure how much you have left to contribute, try the Optum Bank HSA calculator.
Use Lifestyle Changes to Your Advantage
Are you getting married? If so, you and your spouse can either choose to maintain individual coverage and contribute $3,550 each to your HSAs, or you can move from an individual to a family account, allowing you to double your contribution from $3,550 to $7,100.1
Are you turning 55 years old? At the magical age, eligible individuals can start contributing an additional $1,000 a year. And, if your spouse is 55 or older, he or she can establish a separate HSA and make a “catch-up” contribution to that account.
Name Your Beneficiary
It’s not a topic anyone likes to think about, but should you pass on unexpectedly it’s important to name your beneficiary, more for peace of mind than anything. If there is no valid beneficiary designation on file at the time of your death, your legal spouse will be deemed to be your beneficiary. If you are not married at the time of your death, the funds will be paid to your estate. Naming a beneficiary only takes a few clicks and a few minutes, depending on where you have an account. For example, Optum Bank account holders can log in to their account and click on “Manage Beneficiaries.”
Invest: Give Your Money a Chance to Grow
An HSA is a smart way to pay for qualified medical expenses with significant tax advantages. But did you know your HSA may play an even greater role in your overall wealth and retirement strategy if you choose to invest it? Once your HSA reaches a certain designated balance, typically $2,100, you may choose to invest a portion of your HSA dollars in mutual funds, just like any other retirement account.
No matter your age, it’s never too late to start. A couple in their mid-forties who starts contributing the annual maximum for a family, and an extra $1,000 for every year over age 55, can reach a total contribution of $150,000 (24% tax bracket) by retirement.2 Younger groups, such as Millennials, are at the ideal age to participate, considering all the time they have to contribute and allow their funds to grow.
Open an Account
If you have a qualifying high deductible health plan this year, are choosing one next year, or want to rollover an existing HSA, log in to Optum Bank for more information.
This simple checklist can help give your HSA a healthy start in 2020.
About Optum Bank
Optum Bank is advancing the way we save and pay for qualified medical expenses, connecting the worlds of health and finances in ways that no one else can. Optum Bank is the No. 1 provider of health savings accounts (HSAs), managing 4 million HSA member accounts and over $10 billion in assets. By developing proprietary technology and applying advanced analytics in new ways, Optum Bank helps reduce costs while guiding people to the right care. Optum Bank, Member FDIC, is solely dedicated to health care banking with more than 10 years of experience managing health savings accounts. Health care and finance is in our DNA.
About the Author
Barb Page is the vice president of marketing for Optum Financial Services (OFS). In this role, Barb is responsible for the marketing strategy and execution for OFS and Optum Bank. She brings over 30 years of financial services experience and health care expertise to the marketing arena for Optum. Barb has a master’s degree in business communications and a master of science in health care leadership.
|Investments are not FDIC insured, are not guaranteed by Optum Bank®, and may lose value.|
1. Examples are based on 2019 contribution limits, which may change based on IRS regulations
- Assumes 6% rate of return, compounded annually. [Source: Based on 20-year annualized total return with reinvested dividends for the S&P 500 Index (4/30/1999–4/30/2019). Bloomberg.]
Results and amounts will vary depending on your particular circumstances. Fees may reduce earnings on account.
Health savings accounts (HSAs) are individual accounts offered or administered by Optum Bank®, Member FDIC, and are subject to eligibility requirements and restrictions on deposits and withdrawals to avoid IRS penalties. State taxes may apply. Fees may reduce earnings on account. Flexible spending accounts (FSAs) and health reimbursement accounts (HRAs) are administered by OptumHealth Financial Services and are subject to eligibility and restrictions. The content of this communication is not intended as legal, investment, or tax advice. Federal and state laws and regulations are subject to change.