HDHP Details

hdhpJay’s company has started posting details about the upcoming changes in our health insurance, which is going from POS to HDHP in January. They are having an employee meeting about it next week. I think spouses should be invited, seeing how they could very well be the ones in the household who manage/oversee it.

Anyway, I’ve been reading all the documentation and making notes. Yesterday, I found out more about the HSA (Health Savings Account) that we can opt into. Here’s what the literature says:

Six Key Advantages of the HSA

  1. Tax-free dollars can be used to pay for eligible health expenses
  2. Unused dollars roll over for future use
  3. Account earns tax-free interest
  4. Balances over $2,000 can be invested into mutual funds for additional earnings opportunity
  5. You own the account 100 percent, even if you change jobs, retire or move
  6. Reduces your taxable income

When you spend HSA dollars on medical expenses, you save based on your federal and state tax rate! The money in your HSA goes in and comes out tax free when used for qualified medical expenses. For example, a $2,000 annual contribution at a 25% tax rate = $500 in reduced taxable income – that’s real savings for you!

HSA Maximum Contribution

The IRS sets the annual maximum contribution into an HSA. For 2016, if you are only covering yourself, you are limited to $3,350. If you cover dependents, your maximum is $6,750. HSA owners age 55 and older can contribute an additional $1,000.

This annual maximum includes all employee contributions and employer contributions. You are responsible for monitoring your contributions to adhere to IRS guidelines.

Since Jay is 55, we can contribute $7,750/year into the HSA account. The company is “seeding” the account with $1,500 in 2016 and $1,100 in 2017. I think we will contribute the remaining amount, to fully fund the account. I’m all about minimizing taxes! Plus, Jay only plans to work for another 3-4 years, so we have a limited amount of time in which to fund the account. Hopefully, we won’t need to use all of the money each year and we can maintain a balance into the first few years of retirement.

2 thoughts on “HDHP Details

  1. Pingback: Last Month Until HDHP | How I Saved Money Today (and other stuff I think about)

  2. Pingback: Know Your Retirement Variables | How I Saved Money Today (and other stuff I think about)

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