Compound It! How I maxed out my HSA without changing my lifestyle

With a family of four and a high-deductible health plan (HDHP), I had the opportunity to contribute up to $6,900 to my health savings account (HSA). A little more than 10 months into the year, I've already reached that limit.

If you were to split up the $6,900 annual contribution limit into monthly savings goals, you'd need to set aside $575 every month. That's a lot of money, especially if you have other important financial obligations to meet. But there are a few reasons why I've made it a priority this year.

Why I've prioritized my HSA contributions

HSAs are a great way to save for future medical expenses, and based on my family's history with healthcare, we've decided to take advantage of the tax benefits HSAs offer.

For starters, I have two children under the age of four. According to the U.S. Department of Agriculture, parents like me will spend roughly $12,978 each year to raise a child. Nine percent of that annual amount — or $1,168 — goes toward health care costs.

Additionally, my wife and I both have lingering back injuries that require regular visits to the chiropractor and physical therapist. Add in other routine physical and mental health care costs, and we'll easily spend more than the $6,900 HSA contribution limit by the end of the year.

With an HSA, our contributions are tax-deductible, and we don't have to pay taxes on withdrawals as long as they're for eligible medical expenses. And since we're going to spend the money anyway, we've opted for the tax savings instead.

There's no way to know for sure how much this decision will save us, at least not until we file our tax return for the year. But even with a relatively low effective tax rate of 15%, we'll save more than $1,000 dollars contributing to the HSA instead of paying for these expenses out of pocket.

How I've maxed out my HSA

Saving $575 every month isn't easy, but there are a few ways you can do it without giving up too much on other important needs and goals. Here's how I did it this year.

Estimating monthly medical expenses

There are some aspects of healthcare that you can't predict. A couple of months ago, for instance, we rushed my son to the hospital because he was crying about his back hurting, only to realize that he was just overtired and had too often heard my wife and I talk about our backs hurting.

But for the most part, I know what our chiropractor, physical therapy and other regular office visits cost, and I contribute that amount to our HSA at the beginning of the month.

Since I'm expecting to spend that money anyway, it doesn't require me to change the rest of my budget. And if we end up not using the full monthly contribution, we can save the remaining amount for future expenses.

Taking advantage of windfalls

In July, the company I was working for at the time was acquired, and I received a decent payout from the sale. While I used most of the windfall for other financial goals like paying off debt and beefing up our emergency fund, I used a little of it to contribute to my HSA.

Obviously, this was a one-off situation, and I'll never expect it to happen again. But there are other windfalls you can use to achieve that same goal. For example, a tax refund, or a performance bonus at work. As you consider the small windfalls you receive now and then, consider how you can use them for something like an HSA instead of spending the money on other things.

A little help from my job

I won't lie. One of the ways I was able to max out my contribution limit before the end of the year was my employer's matching contribution when I first opened the account.

The amount of the contribution was $1,000, which isn't much higher than the average employer contribution of $801, according to the Society for Human Resource Management. That said, less than a quarter of employers offer an HSA plan, so few people get the kind of assistance I've received.

The bottom line

Maxing out our HSA required me to change how I prioritize my budget. But once I figured it out, it didn't change much about my family's lifestyle or how much money we spend on other things. While every situation is different, it's important to consider ways you can use the money you already have more effectively.


Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.

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