HSA Savings Examples

HSA Savings Examples

Saving Money the HSA Way

When you set up an HSA, you begin saving money that very first day. Your increased annual take-home pay and HSA savings depend on your income tax bracket. If you are in a 30 percent tax bracket, you can save $30 for every $100 that you put into your HSA. Put $1,000 in your account, and you increase your annual take-home pay by $300.

Not only do you save on taxes, but your HSA dollars can grow over time, especially if you decide to compound your funds. The amount you save depends on how you choose to use your HSA funds.

Check out how others use their health savings accounts to save money. Find the profile below that best describes you.

Important: All of the HSA savings examples below assume that you are enrolled in a qualifying high deductible health plan and you meet all eligibility requirements. These scenarios are merely examples, and your savings may vary. Please see the Disclosure Details below.


Single Professional

You’re getting settled into a career and are beginning to plan for the future — pinching pennies where you can to save even more. Since improving your financial health is as important as your physical health, you want to open a WageWorks HSA. You decide you can manage a $250 deduction from your paycheck each month, which means you’ll save $900 in taxes by the end of the year.

And even better, you stay healthy during the year and make the choice to pay $150 out of your pocket for health care expenses when you get the flu. That means you didn’t touch your HSA funds and have $3,000 in your account after the first year — plus the interest earned on your HSA dollars.

Make the same monthly HSA contributions over the next 20 years, and you will compound your savings with more than $105,000 in your HSA (calculated at a 5 percent rate of return). Or you may want to invest your HSA dollars in a Money Market Sweep Account* or Self-directed Investment Account**. This is your HSA … and your choice!


Married with Children

Now that you are married and have two active kids, you need additional funds for unexpected health care expenses. That’s why you open an HSA and make $500 monthly tax-free contributions. Tax savings after the first year: $1,800.

Each person in your family has an annual checkup and the recommended immunizations — covered in full by your health plan — so you don’t use your HSA dollars toward that medical care. Instead, you use HSA funds to pay for occasional Band-Aids and other first-aid supplies. When your 9-year-old breaks his arm in November, you have plenty of money in your account to cover ER fees, X-rays, and all of the other eligible medical expenses. At the end of the year, there's $1,500 left in your HSA that rolls over to the following year.

Maintain this trend! After 15 years, you’ll have more than $23,600 in your HSA (calculated at a 5 percent rate of return). That’s a substantial cushion of savings for your family’s future eligible health care expenses — or those you and your spouse may have during retirement.


Planning for Retirement

You just turned age 55, and the idea of retirement for you and your spouse is no longer just a dream. You’ve been saving throughout your career, but in the next 10 years, you have some catching up to do. An HSA can help with that!

You establish your HSA and begin making $500 contributions each month, which saves you $1,800 in taxes at the end of the first year. Your HSA funds easily cover eligible medical expenses you have throughout the year — prescriptions, checkups, and a new blood pressure monitor. After 12 months, you still have $4,000 in your HSA that will carry over to the following year.

If you continue to save $4,000 in your HSA every year, your savings will add up. By the time you turn age 65, you could have more than $58,000 in your HSA (calculated at a 5 percent rate of return). And if each year you make the additional $1,000 annual catch-up contribution that’s allowed by the IRS, your HSA will total more than $71,000. Your HSA dollars can be used tax-free to pay for eligible medical expenses that you and your spouse may have during retirement. Or you can use your HSA funds toward other living expenses without paying a penalty (but you will pay taxes). It’s your HSA — you decide how and when to use your funds.

Disclosure Details

HSA contributions are deducted before federal and most state taxes. All examples above use a 30 percent tax bracket, but your savings may vary depending on your tax bracket. Check with your tax advisor for details regarding your state taxes and your tax savings.

In the examples above, compounding returns over time are not intended to represent a particular investment or savings vehicle. Rates of return are constant nominal rates, compounded monthly. Actual investments will fluctuate in value. Contributions are assumed to be made at the beginning of the month, and examples do not take into consideration taxes or other applicable deductions, which lower returns.

*A peg balance (currently $1,000) is set to determine the amount of money that moves in and out of the money market mutual fund. Funds in your HSA up to the $1,000 peg balance are a deposit in an FDIC-insured account. Funds in excess of $1,000 are an investment in a money market mutual fund that is not insured by the FDIC or any other governmental agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

**Investments you make through your HSA are not FDIC-insured. Securities offered through UMB Financial Services, Inc., member FINRA, SIPC. UMB Financial Services, Inc. is a subsidiary of UMB Bank, n.a. UMB Bank, n.a. is a wholly owned subsidiary of UMB Financial Corporation. UMB Financial Services, Inc. is not a bank and is separate from UMB Bank, n.a. and other banks. Investments in securities, whether through the Money Market Sweep Account or through investments in the Self-directed Brokerage Account are:

Not FDIC-Insured • May Lose Value • No Bank Guarantee