Health Savings Account Calculator
This calculator can be used to estimate the amount of money it’s possible to save in an HSA from now until retirement. The calculator needs a total of nine inputs, including:
- Whether the owner will use the account to cover members of a family or a single person
- The owner’s current age and they age they plan to retire (and stop funding the HSA)
- The current balance of funds in an HSA, if any
- The account owner’s federal and state income tax bracket
- The expected rate of return on the funds placed in the HSA
- The annual contribution rate for the HSA
- An estimate of the owner’s annual out-of-pocket medical costs, which is an estimate of the funds withdrawn from the account each year
The calculator then provides the user with five outputs, including:
- Their annual contribution rate and out-of-pocket costs, which are the same values entered earlier
- The annual savings accumulating in the HSA, which is the difference between the contribution rate and out-of-pocket costs
- The taxes saved each year by funding the HSA, since contributions are made by the owner on a before-tax basis
- Finally, the calculator supplies an estimate of the total funds in the HSA at retirement
Funding a Health Savings Account
A health savings account, or HSA, is a tax-advantaged way people in the United States who are enrolled in a high-deductible heath plan can pay for their medical costs. Funds contributed to these plans are not subject to federal income tax and can be used to pay for qualified medical expenses without incurring a federal tax penalty. Contributions made by employers are also tax free.
Employer contributions and maximum contributions
Annually, the IRS publishes the maximum contribution limits that can be made for both single and married couples / families enrolled in a high-deductible heath care plan. In 2022, those limits are $3,350 for single / self-only coverage and $7,300 for families. Contributions made by employers count towards this maximum. Taxpayers 55 and older are eligible for a catch-up contribution of $1,000, increasing the totals to $4,350 and $8,300.
Eligible medical expenses include those costs associated with the diagnosis, cure, mitigation, treatment, or prevention of a disease. This includes payments to physicians, surgeons, dentists, and other medical practitioners as well as equipment, supplies, and diagnostic devices.
Annual out-of-pocket costs
One of the more important variables used by our calculator is the estimate of annual out-of-pocket costs. Since this can vary from year to year, we’ve included three categories that are indicative of how much spend may occur, including:
- Low: for individuals and families in good heath, participating in annual wellness examinations, visiting a primary care physician infrequently, and taking prescription medications for common ailments.
- Moderate: for individuals and families in moderately good health, in addition to the medical expenses mentioned in the Low category, specialists are seen frequently, a number of prescription medications are taken on a regular basis, and a family member may require surgery that does not involve an overnight stay.
- High: for individuals and families that have significant medical needs or chronic conditions. In addition to the medical expenses in the Moderate category, prescription medications are used to treat chronic conditions, doctors are seen as many as three times a month, and overnight hospitalization occurs.