HSA Contribution Limits Rise for New Year

HSA limits went up again, which is honestly the best kind of boring financial news. As someone who’s been maxing out an HSA for years now, I’ve learned everything there is to know about these accounts. Today, I’ll give you the quick rundown on what changed.

The New Numbers

If you’ve got individual HDHP coverage, you can now contribute $4,300 annually. Family coverage bumps that up to $8,550. And if you’re 55 or older, you can throw in another $1,000 on top – the catch-up contribution that nobody talks about enough.

I’m apparently one of those people who gets excited about contribution limit increases, and this one’s solid. Every extra dollar you can shelter from taxes is a dollar working harder for you.

Why HSAs Are Actually Kind of Amazing

The triple tax advantage is real and unmatched anywhere else in the tax code:

Contributions are deductible (or pre-tax through payroll). The money grows tax-free. And withdrawals for qualified medical expenses are also tax-free.

That’s what makes the HSA endearing to us retirement planning nerds – no other account does all three. Not your 401(k), not your Roth IRA, nothing.

Unlike those use-it-or-lose-it FSA accounts that stress people out every December, HSA funds roll over forever. They’re yours. Period.

A Strategy Worth Considering

Here’s something most people don’t think about: if you’re healthy and can cover current medical expenses out of pocket, consider maxing your HSA before other retirement accounts.

Let the money grow for decades. Pay medical costs from your checking account now. In retirement, you’ve got this tax-free bucket for healthcare expenses – which, let’s be honest, tend to be significant.

Probably should have mentioned you need a qualifying high-deductible health plan to contribute. Check your plan documents or ask HR if you’re not sure whether yours qualifies.