This Was the Average HSA Balance at the End of 2023

Healthcare is something that tends to catch retirees off guard -- namely because of how expensive it has the potential to be. That's why it's so important to save for healthcare ahead of retirement. While you could do so by padding your IRA or 401(k) contributions, you may find it beneficial to save in an account that's earmarked specifically for healthcare expenses -- a health savings account, or HSA.

HSAs do not have to be reserved for retirement. You can fund an HSA today and withdraw money at any time to cover qualified healthcare expenses.

Recent data from Bank of America shows that HSA balances increased in 2023. However, it's important to not only try to grow your balance, but also manage it wisely.

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Are you taking the right approach to your HSA?

As of the end of 2023, the average HSA balance was $4,380. That's up from $3,930 at the end of 2022.

If you have an HSA, it's a great thing to contribute more each year than you did the last year. And since HSA contribution limits tend to increase from one year to the next, it's possible to do that even if you're already maxing out.

But you don't simply want to keep funding your HSA and call it a day. Rather, you'll want to make sure you're investing the funds you aren't using right away so your money grows into a larger sum over time. Not only that, but you should actually make an effort to pay for near-term medical bills out of pocket to reserve your HSA balance specifically for retirement.

That may seem like a silly thing to do. Why dip into your bank account when you have money in an HSA that's earmarked for healthcare bills?

But the reason is that the longer you leave your HSA balance untapped, the more your balance can grow. Your healthcare expenses are also likely to be higher in retirement than they are today, assuming you're not grappling with a significant medical issue at present. So it's a good idea to set that money aside for a time when you're even more likely to need it.

Check your eligibility every year

HSA eligibility hinges on being enrolled in a compatible health plan. Even if you weren't able to fund an HSA in years past, it doesn't mean that you can't do so at present. It's a good idea to check for eligibility every year.

In 2024, you're eligible for an HSA if your health plan has:

  • A minimum deductible of $1,600 for self-only coverage or $3,200 for family coverage
  • An out-of-pocket maximum of $8,050 for self-only coverage or $16,100 for family coverage

If you change jobs -- and health plans -- midway through the year, check up on your eligibility at that point, too.

HSAs are a super valuable savings tool because of the many tax breaks they offer. Contributions go in tax-free, investment gains are tax-free, and withdrawals are tax-free when used for qualified medical expenses. You'll be hard-pressed to find another plan that packs that many tax benefits into a single savings option.

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