Health savings accounts (HSAs) are so popular these days, it’s hard to believe they’re not even 20 years old yet. But though they’re pretty common, people’s knowledge of how to squeeze the most out of them often lags a little behind. If you have an HSA or are eligible for one, here are five costly mistakes you don’t want to make.
1. Not contributing to your HSA
It’s smart to contribute to an HSA every year if you’re eligible for one and can afford to do so. As long as you have a qualifying health insurance plan — one with a deductible of $1,400 or more for an individual or $2,800 or more for a family — you may set aside up to $3,650 if you have an individual plan or $7,300 if you have a family plan in 2022.
These contributions reduce your taxable income for the year, and if you spend the money on medical expenses, it’s tax-free. That’s a benefit you won’t find with any other retirement account.
If you struggle to remember to make contributions on your own, see if you can set up automated contributions. Remember to review your HSA plan every year. The government periodically raises the annual limits on HSA contributions, so you might be able to set aside more money in future years.
2. Not making catch-up contributions if you’re eligible
Adults 55 and older can contribute an extra $1,000 to their HSA in 2022. This means they can contribute up to $4,650 if they have an individual health insurance plan or $8,300 if they have a family plan. If you’re able to, you should try to set aside this extra cash to help your balance grow even faster.
3. Not investing your funds
Many HSA providers enable you to invest your funds to help the plan grow more quickly. Unless you plan to use your HSA money for a planned expense in the…
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