New HSA Rules in 2025 You Need to Know

Did you know one of the best ways to make and save money actually has to do with your health insurance? 

If you are looking to retire early or even just retire more comfortably, there is a great tool that you may be missing out on. Let’s talk about HSAs in 2025.

What is an HSA

An HSA is a health savings account. It is your account with your money in it. The money that you contribute to your HSA is pretax. This can lower your taxable income and therefore make you eligible for lower taxes. So either a larger refund or a smaller amount owed. 

HSA contribution limits:

• $4,300 for self-only coverage, an increase of $150 from 2024  
• $8,550 for family coverage, an increase of $250 from 2024
• The annual “catch-up” contribution amount for individuals ages 55 or older remains $1,000

Triple Tax Advantage

HSAs offer what’s known as a triple tax advantage. The first of which is that your contributions are pretax therefore lowering your taxable income.

An HSA is just a type of bank account. However, these accounts are interesting. The interest accrued by your account is also not taxable.

As long as you use the funds for qualified medical expenses, the money you withdraw will not be taxed or penalized.

How to Maximize Your HSA

Lowering your taxable income and accruing interest on a bank account, are probably not enough to help you retire early. But, did you know that you can actually invest certain portion of your HSA? And any earnings on those investments are tax free.

So, if you are using your HSA really as a wealth building tool, you don’t have to pull money from it to pay for medical expenses. Instead, let it roll over from year to year. Invest wisely and let that interest accrue. That money will be waiting there for you when you turn 65 because at that point the account will convert to a basic retirement account.

What is an HDHP

If this sounds good and you want to utilize an HSA, how do you do it? Well first you need to enroll in a plan that offers an HDHP.

Like with your HSA contributions, every year the IRS sets a minimum deductible for your plan to be considered a HDHP.

• $1,650 for self-only coverage ($50 increase from 2024)
• $3,300 for family coverage ($100 increase from 2024)
• $3,300 for embedded individual deductible ($100 increase from 2024)

You should know, HDHPs although possibly a great way to save and even make money in the case of an HSA are not ideal for everyone. 

You are actually best served by an HSA if you are someone with very basic, limited medical needs or extremely large medical needs. 

Someone with basic medical needs should still be able to use their insurance for preventive services, prescriptions, and check ups and will likely never meet their deductible. However, these basic service would usually be covered anyway. 

Someone with extreme medical needs would likely meet their deductible very quickly and then be able to enjoy a low monthly premium.

If you fall somewhere in between, an HDHP may not be for you. Even though HSAs may be appealing, make sure that an HDHP will truly serve your expected medical needs for the year. Also, HDHPs are usually not ideal for people with smaller and more illness prone children!

Employer HSAs

Your employer may offer you a plan with HSA which they contribute to. Think of it like an extra little bonus!

They’re probably saving money on these types of plans because higher deductibles tend to have a lower premium.

There is an inverse relationship between premiums and deductibles. Plans with higher deductibles tend to have lower monthly premiums. 

And since under the ACA, employers with more than 50 FTE are required to provide affordable health insurance and contribute towards at least 50% of the premium a high deductible health plan can actually save your employer a lot of money.

If you choose to leave your employer, the money in your HSA will still be yours. You will not be able to actively contribute with an HDHP, but you can choose to use it, leave it or invest it as you see fit.