Health Savings Accounts (HSA) are popular ways to save tax-advantaged funds for medical expenses. HSAs can also help you save for retirement by deferring the account's use for several years while covering short-term medical expenses with other income. Follow these steps to set up an HSA account:
Create HSA Account(s)
Step 1: Go to My Plan > Accounts and Assets
Step 2: Open the Savings section
Step 3: Click on "Add an account +"
Step 4: Indicate that this is an HSA
Step 5: Decide if this is your account or your spouse's account
Step 6: Either link your account or enter details manually (we will be doing Manual Entry for this exercise)
Step 7: Enter an account name and balance. Enter a balance of $0 if you have yet to fund the account
Step 8: If your HSA is invested, enter optimistic and pessimistic growth rates. If your HSA is liquid, enter "0%" for growth rates
Step 9: Press "Next: Contributions" EVEN IF you do not plan to set contributions to the account
Step 10: Decide if you would like to contribute to the account. If you select No, you have successfully set up your HSA. If you select Yes, continue on to step 11
Set up annual contributions
Step 11: Enter a monthly contribution amount
Step 12: Decide when you would like to start and end contributions
Step 13: Press "Save" once complete
HSAs have contribution limits for individuals and families (contribution limits are not modeled in the tool).
HSAs must be used for medical expenses, excluding premiums (spending restrictions are not modeled in the tool).
While HSAs are excluded from Federal Tax obligations, some states tax HSA contributions (state-specific taxes on contributions are modeled in the tool while state-specific taxes on growth within these accounts are not).