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Health Savings Account: How much should I contribute?

Reader Q+A

It's my first time to have an HSA-based plan and my deductible is higher than I'm used to having ($3,000). How much should I contribute to my Health Savings Account? I'm not expecting any huge medical expenses, but I also take quite a few medications and do visit specialists on occasion. 

Great question! Knowing how much to contribute to your HSA will depend not only on your medical history, but also your risk tolerance and income. There isn't one right answer or magical formula. However, we will discuss some questions to ask yourself today that lead to understanding best practices.

First, it's important to note the limits to what you can contribute. For an individual in 2015, you can contribute up to $3,350. For a family in 2015, you can contribute up to $6,650. 

Here are three things to ask yourself to determine how much to contribute to your HSA. 

How much can I afford to contribute?

This should be your first question, as it will be the biggest factor in determining how much to contribute. If you can only afford to contribute $20 per month, then contribute $20 per month. You may want to consider cutting back in other areas of spending in order to be prepared for doctor's bills, prescriptions and other healthcare costs. Figure out how much you are able to contribute and then answer the rest of the questions below. 

How important is it to me to be prepared for the worst-case scenario? 

If you're anything like me, you like to be prepared for the storms that come your way. 

For the risk averse, let's say you were in a car accident tomorrow and had to be rushed to the ER for surgery. You are probably going to meet your $3,000 deductible and possibly even your out-of-pocket maximum. To ensure you have the money to pay for large medical bills, you might consider contributing the cost of your deductible, or $3,000 in this case, to your HSA. That way, you are prepared for the worst-case scenario that may or may not ever come. 

If you can afford to be prepared for the worst-case scenario by contributing the amount of your deductible to your HSA, there really isn't a downside. The money in your account rolls over from year to year, so you don't have to worry about losing it. Additionally, HSA funds can be used on everything from acupuncture to weight loss and diet supplements

Determining how much risk you are willing to take on will help point you in the right direction with your HSA. 

What kind of medical expenses do I expect this year? 

Let's say you are planning on having a surgery or having a baby this year--you'd want to max out your HSA account ($3,300 for an individual). The tricky part comes in if you plan on high healthcare expenses at the beginning of the year and need all of your HSA-money upfront. Why? Typically, people contribute to their Health Savings Accounts on a monthly or per pay period basis, so it takes a full year to build up a balance when you start at $0. 

But it sounds like your expenses will be much lower. You can price out your prescriptions and specialist visits ahead of time and figure out how much to contribute. How? Call your specialist office and ask about the negotiated rate it has with your insurance carrier. Then, visit your local pharmacy and inquire about how much your prescriptions will cost on your new plan. Take the two costs and figure out how much you need to contribute to your Health Savings Account to cover your healthcare expenses for the year. 

HSA-based health plans are great for managing your healthcare expenses. Let us know if you have any further questions. 

For more information, download the free "Consumer's Guide to HSAs." 

If you enjoyed this post, you may also like HSA Bank: How to open a Health Savings Account in 7 easy steps

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