Healthcare costs are consistently rising and employers and employees alike are looking for creative, flexible solutions to manage those costs. Health savings accounts (or HSAs) are an excellent approach to making healthcare more adaptable and affordable! Each year, it can be expected that the contributions limits and rules surrounding HSAs will adjust and 2021 is no exception. Here’s some information that you need to know about 2021 health savings account contributions and rules!
What is an HSA and Who Can Get Them?
A health savings account is exactly what it sounds like – it’s a savings account where you can set money aside specifically for medical expenses. More specifically, a health savings account is connected to individuals and families that are on a high-deductible health plan. An HSA allows users to save money for medical expenses, tax-free! It’s up to the individual how much they contribute to their HSA, so long as they abide by the contribution limits and rules set by the government.
The 2021 Health Savings Account Contribution Limits and Rules.
The Internal Revenue Service (IRS) announced that HSA contribution limits for 2021 are going up by $50 for self-only coverage and $100 for family coverage. The annual limit on contributions for health savings accounts will be $3600 for self-only and $7200 for family coverage, equating about a 1.5 percent increase. For eligible individuals aged 55 or older, an additional contribution of $1000 a year is permissible.
HSA contribution limits are typically tied to inflation rates, but it’s an unfortunate truth that healthcare costs routinely outpace the rate of inflation. This has led to a surge in growth in health savings accounts as a vehicle for managing healthcare costs and savings.
What’s the Advantage of a Health Savings Account?
There are a lot of tax advantages associated with health savings accounts! Contributions to an HSA are pre-tax, meaning that the money is able to grow tax-free. The money in health savings accounts can also be used for benefits and invested in mutual funds and other investment tools. An HSA can be a valuable tool for individuals approaching retirement age, both in management of healthcare costs and in building essential retirement savings.
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