{"id":10956,"date":"2023-05-19T11:44:10","date_gmt":"2023-05-19T15:44:10","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/health-savings-accounts-contributions-increase-at-steepest-level-since-hsas-were-rolled-out-in-2004\/"},"modified":"2023-05-19T11:44:11","modified_gmt":"2023-05-19T15:44:11","slug":"health-savings-accounts-contributions-increase-at-steepest-level-since-hsas-were-rolled-out-in-2004","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=10956","title":{"rendered":"Health savings accounts contributions increase at steepest level since HSAs were rolled out in 2004"},"content":{"rendered":"

People who have health savings accounts are getting a big opportunity next year \u2014 a shot to contribute much more to these tax-advantaged savings accounts.<\/p>\n

It\u2019s a win for families trying to defray medical expenses as inflation rates slowly come off their pricey perch, observers say. It\u2019s also a win for people who can afford to turn the accounts into a long-term wealth building vehicle.<\/p>\n

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Health savings accounts are used to offset the pain of high-deductible health-care plans. With high-deductible plans, customers pay a lower premium, but they pay more for their medical services. With HSAs, pretax dollars are used to pay out-of-pocket health-care expenses. Money deposited in HSAs can roll over from year to year, and may be invested in a wide range of mutual funds. Many people, however, do not have access to these accounts through their health-insurance plan.<\/p>\n

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\n \u201c<\/span>For 2024, a person can contribute up to $4,150 in an HSA, up from $3,850 this year. The contributions for a family account have risen to $8,300 next year, up from $7,750 in 2023\u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

For 2024, a person can contribute up to $4,150 in an HSA, up from $3,850 this year, the IRS said this week. The contributions for a family account have risen to $8,300 next year, up from $7,750 in 2023, the tax agency said. The maximum catch-up contributions for people 55 and above stays at $1,000. So a couple above the age of 55 can sock away $10,300 next year.<\/p>\n

For 2024, a high deductible plan, among other things, has to have a deductible that\u2019s at least $1,600 for individual coverage and $3,200 for family coverage, the IRS said.<\/p>\n

These accounts get three types of tax breaks: there\u2019s a tax deduction for money that goes in, tax-free growth and then tax-free distributions for qualified medical expenses on the way out. That even counts for medical expenses they incurred years ago, so long as they have the receipts.<\/p>\n

The annual increases usually ranged around 1% to 3%, according to the Employment Benefit Research Institute\u2019s compilation of contribution limits through the years.<\/p>\n

The 2024 contribution increases are the steepest year-over-year increases since people could start putting money into these accounts beginning in 2004. The 2023 contribution limits for individuals grew more than 5% from the prior year, and they grew more than 6% for families. Meanwhile, the 2024 contribution limits for individuals and families will increase more than 7% from their maximums this year.<\/p>\n

Like certain other parts of the tax code \u2014 including the standard deduction and income tax brackets \u2014 the tax rules surrounding health savings accounts are indexed with inflation rates, said Jake Spiegel, research associate, health and wealth research at the Employment Benefit Research Institute, a nonprofit organization based in Washington, D.C.<\/p>\n

\u201cInflation is hitting us all,\u201d but higher HSA contribution limits could let people \u201cstretch their health-care dollars a little,\u201d Spiegel said. \u201cThe upshot here is that you are able to save more than you otherwise could.\u201d<\/p>\n

Related: <\/strong>Health savings accounts have 4 superpowers<\/p>\n

How HSAs differ from FSAs<\/h2>\n

Despite their many advantages, many people don\u2019t have HSAs. Only one quarter of workers within an HSA-eligible plan were enrolled in the accounts, according to a 2022 employer health benefit survey from KFF, an organization focused on public health. <\/p>\n

Just over one-third of workers, 35%, had access to these accounts last year, according to the Bureau of Labor Statistics \u2014 even though access to the accounts didn\u2019t necessarily mean these workers actually used the accounts.<\/p>\n

These accounts are different than flexible spending accounts (FSAs), which also let people put aside money to defray costs. For starters, FSAs account holders cannot invest the money and if the employer allows FSA money to roll over from one year to the next, the carryover amount is capped at $610 in 2023. <\/p>\n

Even when people are enrolled in HSAs, many aren\u2019t using it as much as they could, Spiegel said. The average account balance was just over $4,300 at the end of 2021 and individuals contributed an average $1,880 that year, according to EBRI\u2019s research of a database with more than 13 million accounts.<\/p>\n

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\n \u201c<\/span>Unlike HSAs, flexible spending account holders cannot invest the money, and if the employer allows FSA money to roll over from one year to the next, the carryover amount is capped at $610 in 2023. \u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

Very few account holders use the money sitting in their HSA for investments, Spiegel said. Within the database, 12% of the accounts were invested in assets other than cash, he noted.<\/p>\n

Of course, there may be good reasons why most people keep their HSA money away from the stock market. \u201cIf you don\u2019t have the cash flow to pay out of pocket, you might not want to subject your HSA to market risk,\u201d he said.<\/p>\n

But the preferential tax treatment is a powerful reason to use HSAs to grow a portfolio, financial experts said. That puts extra significance on the new contribution limits, they add.<\/p>\n

\u201cEspecially in a high-inflation environment where there is an increasing cost of living, it is helpful to have the opportunity to put more into the HSA and take advantage of the tax-efficient investment opportunity to accumulate growth,\u201d said Kristy Jiayi Xu, founder of Global Wealth Harbor.<\/p>\n

The HSA is \u201ca really great planning tool for a high-income earner who doesn\u2019t have the ability to make Roth [IRA] contributions,\u201d said Nicole Webb, senior vice president and financial advisor at Wealth Enhancement Group.<\/p>\n

Traditional IRAs are funded with before-tax money, and are taxed upon withdrawal. Roth IRAs are funded with after-tax money and withdrawals are made tax-free. <\/p>\n

Tax rules allow people to deduct contributions to traditional IRAs so long as they meet certain conditions, pegged to issues like coverage through a workplace retirement plan and annual income. Above phase-out ranges, deductions don\u2019t apply if a person or their spouse has a retirement plan through work.<\/p>\n

For individuals, the phase out ends at an annual income of $153,000 in 2023 and for married couples, it\u2019s $228,000.<\/p>\n

If income limits block Roth contributions, HSAs become a destination to grow a portfolio with preferential tax treatment, Webb said. For an affluent, two-income household the Roth IRA phase-out could come faster than they think, Webb noted. When Webb talks to clients about their portfolio potential and tax planning with HSAs, \u201cthey don\u2019t generally know, and are surprised to learn them.\u201d<\/p>\n

Read: <\/strong>If you\u2019re close to retirement and have a Health Savings Account, don\u2019t make this expensive mistake<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

People who have health savings accounts are getting a big opportunity next year \u2014 a shot to contribute much more to these tax-advantaged savings accounts. It\u2019s a win for families trying to defray medical expenses as inflation rates slowly come off their pricey perch, observers say. It\u2019s also a win for people who can afford […]<\/p>\n","protected":false},"author":1,"featured_media":10957,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-10956","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nHealth savings accounts contributions increase at steepest level since HSAs were rolled out in 2004 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"People who have health savings accounts are getting a big opportunity next year \u2014 a shot to contribute much more to these tax-advantaged savings\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=10956\" \/>\n<meta property=\"og:locale\" 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