An individual can contribute up to the maximum regardless of his income, and his entire contribution is tax deductible. He can even contribute in years when he has no income. He can also contribute if he is self-employed.
Mark Hebner, founder and president of Index Fund Advisors, Inc. based in Irvine, California, explained that maxing out contributions before the age of 65 allows the person to save for general retirement expenses beyond medical expenses.
Although they will not receive the tax exemption, it gives retirees more access to more resources to fund general living expenses.
While it may sound counterintuitive, the HSA is primarily an investment tool. Granted, the basic idea behind an HSA is to give people with a high-deductible health plan a tax break to make their out-of-pocket medical expenses more manageable.
But that triple tax advantage means that the best way to use an HSA is to treat it as an investment tool that will improve one’s financial picture in retirement.
And the best way to do that is to never spend one’s HSA contributions during his working years and pay cash out of pocket for his medical bills. In other words, people should think of their HSA contributions the same way they think of their contributions to any other retirement account – untouchable until they retire.