Estimate the potential growth of your Health Savings Account (HSA) and the tax savings you could accumulate by retirement. HSAs offer a unique "triple tax advantage" for eligible individuals enrolled in a High Deductible Health Plan (HDHP).
Understanding Your Health Savings Account (HSA)
A Health Savings Account (HSA) is a tax-advantaged savings account that can be used for qualified medical expenses. It's available to individuals who are enrolled in a High Deductible Health Plan (HDHP). HSAs are unique because they offer a "triple tax advantage":
Tax-Deductible Contributions: Money you contribute to your HSA is tax-deductible, reducing your taxable income for the year.
Tax-Free Growth: Any interest or investment earnings within your HSA grow tax-free.
Tax-Free Withdrawals: Withdrawals for qualified medical expenses are completely tax-free. After age 65, you can withdraw funds for any purpose without penalty, though they will be taxed as ordinary income if not used for medical expenses.
How the HSA Calculator Works
This calculator helps you visualize the long-term benefits of contributing to an HSA. Here's a breakdown of the inputs and what they represent:
Your Current Age & Desired Retirement Age: These inputs determine the number of years you have to contribute to and grow your HSA before retirement.
Annual HSA Contribution: This is the amount you plan to contribute to your HSA each year. Remember that the IRS sets annual contribution limits, which can change. For 2024, the individual limit is $4,150 and the family limit is $8,300 (with an additional catch-up contribution of $1,000 for those aged 55 and over). This calculator assumes a consistent annual contribution up to retirement.
Current HSA Balance: If you already have an HSA, enter your current balance to see how it contributes to your future growth.
Annual Investment Growth Rate: HSAs can often be invested, allowing your money to grow over time. This rate represents the average annual return you expect on your investments. A common assumption for long-term diversified portfolios might be 5-7%.
Marginal Income Tax Rate: This is the tax bracket you fall into. It's used to estimate the tax savings you receive on your annual contributions. For example, if your marginal tax rate is 22% and you contribute $3,850, you save $847 in taxes that year.
Interpreting Your Results
The calculator provides several key outputs:
Years Until Retirement: The total number of years your HSA will grow.
Total Contributions Made: The sum of all your annual contributions over the years.
Estimated HSA Value at Retirement: This is the projected total value of your HSA, including your contributions and the tax-free investment growth.
Estimated Tax Savings from Contributions: The total amount of income tax you could save over the years by making tax-deductible HSA contributions.
Estimated Tax-Free Investment Growth: The total amount your investments are projected to grow, completely tax-free within the HSA.
Disclaimer: This calculator provides estimates based on the inputs you provide and simplified assumptions (e.g., consistent annual contributions, fixed growth rate, fixed tax rate). Actual results may vary due to changes in contribution limits, investment performance, tax laws, and individual circumstances. It is not financial advice. Consult with a qualified financial advisor for personalized guidance.