America's Bank

How HSA Savings Can Help You Plan for the Future

The Seavers understand the importance of taking advantage of the triple tax advantage offered by an HSAFootnote1 as a key component of their strategy for managing present and future healthcare expenses.

By maintaining their current saving and spending rates over the next two decades, Sally and Steve can utilize the balance in their HSA to pay for their healthcare needs during their retirement. With the aid of the HSA balance and tax savings calculator, the Seavers can estimate the extent of their HSA savings as time progresses.

The Seavers provided the following information for the calculator:

• Annual HSA Contributions: $4,000
• Annual Expenses to Be Paid from HSA Savings: $2,000
• Federal Income Tax Rate/Bracket: 25%
• State Income Tax Rate: 0%
• Interest Rate or Average Annual Rate of Return: 2.5%

If we take these assumptions into account, the Seavers' HSA can hold ,000 over a period of two decades. Without the HSA, this ,000 would have been taxed as standard income, costing Sally and Steve $20,000 over 20 years.

Comparison of Pre-Tax Contributions after 20 years

Without HSAWith HSA

Income for Family Health Needs (Before Taxes)

,000

,000

Minus 25% Federal Income Tax

$20,000

$0

Money Left for Family Health Expenses

,000

,000

Note: This illustration assumes payroll-deduction HSA contributions, a 25% tax bracket throughout participation, and ignores APR or effective rate of return. Variations in tax rates or treatment may have an impact on comparative results.

The combination of pre-tax contributions, tax-free withdrawals, and tax-free returns can result in substantial savings for the Seavers across two decades. Based on the information entered into the HSA balance and tax savings calculator, Sally and Steve saw that after withdrawing for qualified medical expenses, they would have $51,089 in their HSA at the culmination of 20 years. Additionally, the Seavers are expected to save $23,091 in total taxes due to their use of HSA.

This hypothetical example assumes annual pretax contributions of $4,000, annual withdrawals of $2,000 for qualified medical expenses, a 25% tax rate, and a 2.5% interest rate throughout participation. Calculations for the total HSA balance and tax savings resulting from continuous contributions and withdrawals assume that these happen in lump sum increments at the conclusion of every year. Any adjustments to contributions, withdrawals, tax rates, and taxes in regards to the treatment of investment earnings can impact the results. Always consider your individual situation, investment time frame, and current and foreseeable income tax brackets when making choices. Hypothetical findings are provided merely for illustrative intention and do not represent the performance of any particular investment vehicle or account, neither past nor future. Remember that taxes are owed upon withdrawal of assets without a qualified medical expense. For mutual fund investments, the return on investment and principal value are subject to fluctuations and can be worth more or less than their original cost at redemption.

To embark on your personal HSA enrollment journey, click the "Apply now for an individual HSA" button. This will direct you to the appropriate platform where you can seamlessly commence the enrollment process. Don't hesitate to take advantage of this opportunity to acquire an HSA that caters to your individual needs.