Tips to help save for health care now — and in the future

Putting aside savings may be a challenge for some people – especially in this current economy and climate. But there are reasons why you may want to consider taking steps, even small ones, to help you feel more financially stable.

Optum Financial General Manager, Paul Leary, says when it comes to your personal finances, having an emergency fund tucked away is important to help protect you from a financial emergency — and that includes an unexpected health issue. Saving can happen at any age, but it’s always helpful to start early, he said.

With this in mind, here are a few tips from Optum Financial to help you save for health care by using your health accounts as an investment vehicle.

One way to be proactive is to enroll in a health savings account (HSA), if you are in a qualifying high deductible health plan and meet other IRS eligibility requirements. HSAs are income tax-advantaged accounts that can help pay for out-of-pocket medical, dental and vision expenses. Yet, most Americans don’t fully understand how to use their HSAs or aren’t aware of the multiple ways to use it to its full potential.

Here are a few things to keep in mind with HSA accounts:

• You may contribute to your HSA via payroll deductions or from your own funds, but either way, it’s tax-advantaged.
• You can contribute as little as $1. Or in 2020, you can deposit up to the IRS maximum of $3,550 for an individual coverage to your HSA and $7,100 for a family.
• In 2021, you can contribute $3,600 – up $50 from 2020 - to an HSA if you have individual coverage and $7,200 for family coverage. And If you are 55 or older, you can deposit an additional $1,000 annually until you enroll in Medicare.
• You can use your HSA funds to pay for qualified medical, dental and vision expenses such as prescription drugs, dental expenses, co-pays, deductibles, co-insurance amounts, glasses, feminine hygiene products and more. Your HSA can also be used to pay your Medicare, long-term care insurance premiums and your deductibles.

“Millennials are at the ideal age to participate, and their funds have time to grow over the years,” Paul said. “Yet, millennials contribute to HSAs at the lowest rate of all age groups in the workforce.”

A health savings account may also be used as a retirement savings vehicle for health care expenses in retirement.

“Both 401(k) pre-tax payroll contributions and HSA payroll contributions are made without deductions for state and federal taxes,” Paul said. “However, HSA contributions are truly tax-advantaged as within Medicare and Social Security taxes are not withheld.”

Consider this scenario: Sarah is 25 years old and single. Each year since 2004 when HSAs were first available to contribute, she has deposited the individual maximum contribution amount. Based on the limits per year, she has made a total contribution of $53,050. She invests any balance over $3,600 with an average return rate of 2.5%, bringing her balance to $54,376.25. She uses $10,000 for qualified medical expenses and leaves the rest for when she is in retirement¹. 

When it comes to your finances, it’s important to have a plan for the future to help you feel more in control of those unexpected expenses. If you already have an Optum Bank health savings account, log in at optumbank.com and consider taking a class at Optum Bank Academy or review any of the many educational resources in the Health Finance Education Center. If you are not an Optum Financial customer and would like to open an HSA or roll another HSA over, go to optumbank.com and click on enroll today.