New HSA Limits for 2016
As with IRA contributions, 401k contributions, and life itself, everything changes. HSA (Health Savings Accounts) are no different. The maximum contributions tend to increase every year or two (per IRS discretion).
The new HSA 2016 maximum contribution limits were recently released:
- Individuals – $3,350 (stays the same)
- Families – $6,750 (an increase from 2015)
- Catch-Up (for 55 and older) – $1,000 additional
Remember, to qualify for an HSA contribution you MUST have insurance coverage which qualifies as an HDHP – High Deductible Health Plan:
- Individual HDHP Deductible – NOT LESS THAN $2,300 with maximum out-of-pocket of $6,550 (an increase over 2015)
- Family HDHP Deductible – NOT LESS THAN $2,600 with maximum out-of-pocket of $13,100
Health savings accounts are amazing! Contributions are made pre-tax, growth is tax-deferred, and distributions are tax-free if used for medical expenses. If you use HSA’s correctly they’re the only triple tax free savings account available. If you’re eligible you should be maxing it out every year you can.
Even if you don’t use the funds for medical expenses you can use them for other retirement expenses. Just wait until you’re 65 or older and you’ll only pay normal income tax on distributions.
Why aren’t more Americans taking advantage?
Ironically as I write this, an Indianapolis based firm “United Benefit Advisors” reported shocking health savings account information. United Benefit Advisors puts out an annual Health Plan Survey. It’s quite robust report on the state of healthcare and finances.
For 2014 they found that family contributions saw a 7% decrease in HSA contributions. The HSA is almost as good as your 401k plan in many ways. Why are people not using this great retirement savings opportunity? They simply don’t have good financial advice or don’t understand how good these accounts actually are.