Open enrollment is here: Why an HSA is worth it
For many employees, open enrollment begins in early November
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Open enrollment starts in November, and it's important to reflect on the big picture to determine what type of plan you may need as the window to make additions is limited, which includes health savings accounts (HSAs).
"A plan that worked well for you one year may not make sense for you next year," says Charlene Rhinehart, spokesperson at GoodRx in Chicago.
First, Rhinehart recommends looking at your finances and determining what you would be comfortable paying each month and how much you could spend if you had to pay out of pocket.
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- Are you anticipating any major life changes, like getting married or having children?
- Are you planning on retiring in the near future?
- Also, consider your current healthcare needs. Do you have chronic conditions that require a specialist or prescription medication? Do you have a doctor that’s in a network you would prefer to keep seeing?
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What is an HSA?
An HSA is a tax-advantaged health savings account. "If you are enrolled in a high deductible healthcare plan (HDHP) where your monthly payments may be lower, but you’re often paying more out of pocket, an HSA allows you to set aside tax-free money to cover select healthcare expenses," Rhinehart says.
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Getting the most out of your HSA
It’s important to look at your healthcare benefits to get the most out of your HSA. "For example, you should check and see if your employer will contribute to your HSA through a wellness incentive," Rhinehart tells FOX Business.
Keep in mind, there’s also a limit to how much you can contribute to your HSA each year. According to Rhinehart, for 2024, HSA contribution limits are $4,150 for individuals and $8,300 for families. "Knowing the yearly contribution limit is important in deciding how much you would like your employer to contribute, if this is a benefit you’re eligible for through work,:" she continues. "If you opt for employer contributions, you won’t have to pay taxes on the money they add."
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What if your HSA still has funds at year-end?
HSAs also roll over each year, so don’t feel pressured to use all the funds before the end of the calendar year, says Rhinehart. "Let it roll over to the following year and continue to grow," she advised.
And if you have money sitting in your account, consider putting it to work by investing it. Your investments grow tax-free, and you don’t have to worry about paying taxes on your withdrawals either as long as you use the funds to pay for qualified medical expenses, she adds.
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How open enrollment can align employee's healthcare goals
There are several steps you can take, especially during annual enrollment, that may help put you on a stronger financial footing when it comes to your health, Ryan Viktorin, CFP, vice president and financial consultant at Fidelity Investments in Boston, tells FOX Business.
First, Viktorin says to make sure you research your health care options, including what premiums, deductibles and out-of-pocket maximums look like within your plan options.
Then, be sure you understand what kind of preventative care benefits your employer may offer — things like mental health support or physical wellness stipends may come at low or no cost to you, she adds.
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And, for those enrolled in a high-deductible health plan, keep in mind you have access to a health savings account, Viktorin tells FOX Business.
The Fidelity Investments Fall 2023 Health Care Outlook study revealed nearly half of Americans are unfamiliar with HSAs, meaning there are many Americans who could be missing out on the financial benefits an HSA can provide.
Why is having an HSA so valuable?
What many people don’t realize is that HSAs can play a large role in your overall financial plan. "We know there’s a strong link between health and financial well-being, so maximizing the benefits available to you can pay off both now and in the future," Viktorin continues.
The most important feature of an HSA is the "triple-tax advantage" — in other words, three distinct ways the account is federally tax-advantaged.
According to Viktorin: One, the money you put in, also known as your contributions, goes in pre-tax; two, you can use the account to pay for qualified medical expenses tax-free; and three, you can also invest the money in your HSA to potentially grow to use in the future. "All of this growth is tax-free, too, assuming it’s used for qualified medical expenses," she says.