Contributing to an HSA in 5 Easy Steps

January 31, 2024

What is an HSA? An HSA is a tax-advantaged medical savings account that can be used tax-free for qualified medical expenses. HSAs are designed to be used in conjunction with a High Deductible Health Plan (HDHP). HSAs offer triple tax advantages: contributions are deductible, earnings are tax-deferred while in the HSA, and distributions are tax-free when used for qualified medical expenses.

1. Determine if you are eligible to make an HSA contribution. To be eligible to contribute to an HSA, you must be enrolled in an HDHP. To be an HDHP, a plan must meet certain limits on deductibles and out-of-pocket expenses. These limits are adjusted annually for inflation. You may not contribute to an HSA if you are enrolled in Medicare because Medicare is not an HDHP.

2. Don’t count yourself out too soon. Your income is never too high to make a deductible HSA contribution. Also, you do not need to be working. There is no requirement that you have earned income or taxable compensation to make an HSA contribution. An HSA contribution can also be made by an employer. Your participation in an employer retirement plan or your IRA contribution does not affect your ability to contribute to an HSA.

3. Find out how much you can contribute. The amount you can contribute to an HSA will depend on the type of health insurance coverage that you have. You may make either an individual or family contribution to your HSA. The limits for both types of contributions are adjusted annually for inflation. If you are age 55 or older during the year, you may make a catch-up contribution to your HSA in addition to the regular contribution amount. Prorated HSA contributions are

possible if you are eligible to contribute for only part of the year.

4. HSA contributions can be invested in the same way as other retirement funds. That means that stocks, bonds, and mutual funds can all be used in an HSA. Employers should be mindful of rules that trigger ERISA coverage. Finally, some HSA custodians require a minimum account balance before funds can be invested.

5. Get your contribution done by the deadline. The deadline for making an HSA contribution for the year is the tax-filing deadline, not including any extensions. Your HSA custodian will be reporting your HSA contribution to the IRS, and you will need to report it on your tax return by filing IRS Form 8889.

< Older Post

Newer Post >

Mailbag: Is It Bad to Leave My Old 401k Where It Is?

By Walter Storholt • June 5, 2025

If you’ve switched jobs in the past few years, chances are you’ve got an old 401k sitting somewhere, collecting dust and possibly fees. Today, Frank answers a listener’s question about what to do with old 401ks, when a rollover might make sense, and how to avoid common pitfalls when making the switch.

Planning For Multiple Beneficiaries in 5 Easy Steps

May 29, 2025

When do multiple beneficiaries exist? Multiple beneficiaries exist when an individual names more than one beneficiary for their IRA. When should you name more than one beneficiary? When you want your IRA assets to go to more than one person or entity without having to incur additional fees or paperwork by maintaining separate accounts for each beneficiary.

Fixing Missed 60-Day Rollover Deadlines with Self-Certification in 5 Easy Steps

May 29, 2025

If I miss the 60-day deadline for completing an IRA rollover, is there any way to save the rollover amount from tax? Failing to complete a 60-day rollover on time can cause the rollover amount to be taxed as income and perhaps subject to a 10% early withdrawal penalty. However, the deadline may have been missed due to reasons that are not the taxpayer’s fault. Fortunately, for such cases, the IRS has created an easy, low-cost way to fix late rollover errors. Revenue Procedure 2016-47 enables individuals to self-certify that they are eligible for a waiver of the 60-day deadline and complete a late rollover

Is 2025 A Bad Time To Retire?

By Walter Storholt • May 29, 2025

Plenty of people have concerns about stock market volatility, a potential recession on the horizon, and worries for the economy amidst recent news. What if you’ve had 2025 marked on the calendar for a while as the year you plan to retire? Is this a bad time to do it?

Mailbag: How to Stay Smart When the Market Drops

May 22, 2025

Market volatility has a way of shaking confidence. It's easy to feel uncertain, but reacting without a plan could do more harm than the drop itself. In this special mailbag episode, Frank tackles timely listener questions about navigating today’s uncertain market.

What the Greats Say About Market Crashes

May 15, 2025

When the market is volatile, it's easy to feel like you're the only one who's ever felt this anxious. But some of the greatest investors in history have lived through chaos, and they left behind wisdom that still applies today. In this episode, Frank turns to voices like Warren Buffett, Benjamin Graham, and Jack Bogle to remind us how to stay grounded when everything feels uncertain.

Weathering the Market: 90 Years of Data

May 8, 2025

When markets are shaky, it’s tempting to pull your money out and “wait for things to settle.” But what if that instinct could cost you in lost growth? In this episode, Frank shares compelling statistics on what happens when investors miss the best days in the market, and how a few wrong moves could potentially reduce your long-term returns.