Last May, the Health Savings Account (HSA) contribution limits for this year were announced. The article included the new HSA contribution limits for those with varying coverage levels and the minimum deductible limits for HSA compatible health plans. And one other piece of information…
The catch-up contribution.
In the year they will turn 55, individuals with an HSA can contribute an additional $1,000 to their accounts. Here is what I did to set up my HSA catch-up contribution.
Step 1: Go to HR
The first step was to let my HR department know about the change. I’m currently enrolled in family coverage, so I can contribute $7,100, at most, to my HSA in 2020. That’s without the catch-up contribution.
With the catch-up contribution of $1,000 that will jump up to $8,100 because I have family coverage. I had to fill out some paperwork to make the change, but once I finished that, the new contribution took place with my first January paycheck.
Step 2: Follow the money
Like regular HSA contributions, the catch-up contribution is broken down across paychecks over the course of the year.
I’m thankful I started my catch-up contribution in July instead of January. It meant I avoided having to prorate my contributions over the course of four months between August and December.
If you are contributing the maximum amount for single coverage ($3,550) and you do the full catch-up contribution, you will be setting aside $4,550 in your HSA. (Those numbers change to $7,100 and $8,100, respectively, for family coverage).
Step 3: Enjoy the continuing tax break
While being over the hill at 55 has some down sides, this isn’t one of them. With the additional $1,000 from the catch-up contribution, I’ll be able to save even more on taxes. I never look forward to tax season, but I’m hoping next April will be a little easier on the books.
All in all, an HSA contribution was the right decision for me and my family. It allows us to save for medical expenses – both planned and unplanned – and sets me up for retirement that much more.
