Did you know? In America, average working professionals will pay their medical expenses and healthcare expenditures while in retirement. After a lifetime of working, saving, and budgeting, what did you spend all this on? Doctors and hospital bills. So, one common question arises: “How much should I have in my HSA at retirement?”
Thinking of having a few dollars in your HSA account is depressing and scary. The reason for this issue is that you underestimate American medical expenses or are unaware of the maximum benefits of an HSA account. Let’s discuss the complete in-line system.
What Is HSA?
HSA means Health Savings Account, which is a type of savings account specially designed for future medical expenses. The part is the money you put in an HSA account is tax-free or pre-tax money. The account can be used for payments for doctor’s visits, medical expenses, and prescriptions.
Also, if you don’t use the money, it will keep growing, and you can use it later after retirement. But to open an HSA, you must first apply for an HDHP, a type of health insurance.
HDHP stands for High-Deductible-Health-Plan, an insurance plan where you must pay a low monthly premium, and in this, you must pay first till the insurance kicks in. The key? Understanding how much I should have in my HSA at retirement.
How Much To Contribute To HSA for Retirement?
If we talk about 2025, the self-coverage varies from $4100 to $4300, and if you are taking a family-coverage plan, then it is $8400 to $8550.
The HSA comes with the astounding benefit of saving money pre-tax, which means you don’t have to pay tax on the money you are putting in an HSA account. You can also use this money for dental medical issues, eyeglasses, and contact lenses. There is a plus to it; you can also invest the HSA money with tax-free investment advantages.
Expert Insights On How Much You Should Have In Your HSA At Retirement?
There are some magic numbers that most of the financial experts suggest. They suggest aiming for $200,000 to $300,000 in your HSA by the time of your retirement.
There is a suggested age-wise balance in your HSA :-
| Age | HSA Balance |
| 30 | $20,000-$30,000 |
| 40 | $60,000-$90,000 |
| 50 | $130,000-$180,000 |
| 60 | $200,000+ |
What Are The Eligibility Requirements For An HSA?
There are some boundary line IRS criteria that you must possess to apply for or use an HSA. The terms are :-
- HDHP—At first, you must be eligible for a healthcare insurance plan called HDHP (High-Deductible Health Plan). HDHP is a health insurance policy that goes parallel to the HSA in terms of availing the benefits.
- A rule or term is there that the other beneficiaries cannot be allowed to contribute any sum of money at any instance of time to the HSA.
HSA vs. 401(k)
There are some other investment and retirement benefit plans available, like 401(k). If we go further with 401(k), it is a qualified profit-sharing plan in which you can contribute some amount of money to a different account, which you can then invest also and make it grow.
But in contrast, HSA offers more advantages than 401(k), in HSA, the money is pre-tax, and tax will not be applied at withdrawal for some medical expenses.
So, before knowing that, how much should I have in my HSA at retirement? You must understand how to grow your HSA money.
If you’re also wondering how assets like 401(k)s or pensions are handled during a split, check out our guide on how are retirement accounts divided in an Arizona divorce.
How To Grow Your HSA?
HSA money grows with time, but if you want to contribute the maximum amount, then there are some tips :-
- Choose a low-processing and other fee insurance plan.
- Use your savings for some other expenses and let HSA grow.
- Employer contribution.
- Review your medical expenses.
How Much Should I Have In My HSA At The Time of Retirement?
It depends on how much you have paid for your medical expenses till now in any situation. On average, if you are a male retiree, you should aim to have $180,000 saved in your HSA, and if you are a woman, then this amount will be $210,000, according to Bank of America.
If we talk about a family HSA and HDHP insurance plan, then it should be between $280,000 and $350,000 of money in your HSA.
Conclusion :-
An HSA is not only a medical expense-saving scheme; it is more than that. It provides many benefits, including medical expenses, investment planning, and future savings. It also provides a feature of tax-free savings and investment. Many people underestimate the enclosed benefits of HSAs and suffer when they are needed the most. But by going through this article, you will clearly understand all the terms and benefits of an HSA.
From now on, if someone asks you, “How much should I have in my HSA at retirement?” – You know the answer and feel confident in spreading your knowledge.
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Frequently Asked Questions
What is a good amount to have in HSA?
It depends on your past medical expenses; based on stats, on average, it is recommended to have from $180,000 to $300,000 for retirement.
What is the average HSA balance by Age?
It is suggested that for the age group of 30 to 40 you must have $20,000 to $90,000 and for the age group 40 to 60 it is $90,000 to $200,000+.
IS an HSA good for Retirement?
HSA is a good way to save and secure your future medical expenses. Also, it provides tax-free savings.
Is it better to max out 401k or HSA?
The only difference in 401(k) and HSA is HSA is tax-free on withdrawal for medical expanses.
