This retirement savings plan gets even more attractive in 2022
Healthcare is a major expense that people of all ages grapple with, but it can be an especially large burden for seniors on a fixed income.
It's for this reason that setting funds aside for future healthcare costs is so important. And starting next year, you'll have an even greater opportunity to sock away money for your senior medical expenses while enjoying a host of tax breaks.
HSA contribution limits are going up
If you're not familiar with a health savings account, or HSA, it's designed to help you cover near- and long-term medical costs. It's easy to confuse HSAs with FSAs, or flexible spending accounts, which require you to use up your plan balance year after year, but HSAs are different in that their funds never expire.
In fact, the best way to maximize an HSA is to contribute more money than you expect to need in the near term for medical expenses. That way, you can invest the rest and carry it forward into retirement, when you'll likely need it the most.
To be clear, an HSA is not a dedicated retirement plan like a workplace retirement plan or IRA. However, it can easily be used as one, especially if you make a point to save extra in yours, invest it, and carry that money with you into your senior years.
The great thing about HSAs is that they're triple tax-advantaged. Contributions are made with tax-free dollars, investment growth is tax-free, and withdrawals are tax-free, provided they're made to cover qualified medical expenses. Currently, the annual contribution limits for HSAs are as follows:
- $3,600 if you're saving on your own behalf and are under 55
- $4,600 if you're saving on your own behalf and are 55 or over
- $7,200 if you're saving at the family level and are under 55
- $8,200 if you're saving at the family level and are 55 or over
For 2022, however, these limits are rising by $50 for individual coverage and $100 for family coverage to account for inflation. As such, the aforementioned thresholds will top out at:
- $3,650 if you're saving on your own behalf and are under 55
- $4,650 if you're saving on your own behalf and are 55 or over
- $7,300 if you're saving at the family level and are under 55
- $8,300 if you're saving at the family level and are 55 or over
Of course, there is one catch when it comes to HSAs -- you can only save in one if you're enrolled in a high-deductible health insurance plan. Right now, that means having an individual deductible of $1,400 or a family-level deductible of $2,800. These deductible thresholds will remain in place for 2022. However, to qualify for an HSA in 2022, your health plan must also have a maximum out-of-pocket spending limit of $7,050 for individuals or $14,100 for families, which represents an increase from 2021.
It pays to max out an HSA
There's no getting around medical spending in retirement. Even if you kick off your senior years in excellent health, you'll still have a world of costs to contend with, from Medicare premiums to deductibles to copays. By maxing out an HSA today, you'll set yourself up with dedicated funds to cover those bills in the future. And that's a great way to make your retirement a lot less stressful.
Watch this video to learn more about the benefits of Health Savings Accounts and how they can be an important vehicle for healthcare savings.
This material is provided by Voya for general and educational purposes only; it is not intended to provide legal, tax, or investment advice. All investments are subject to risk. Please consult an independent tax, legal, or financial professional for specific advice about your individual situation.
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