Healthcare is an expense that seems to burden Americans at just about any age, which is why it's important to have money on hand to pay for it. That's where health savings accounts, or HSAs, come in.

An HSA allows you to set aside money for medical costs that include copays for doctor visits, medications, and dental treatment. Unlike flexible spending accounts, HSAs don't require you to spend down your plan balance year after year. Quite the contrary -- carrying HSA funds forward could work to your benefit.

In 2024, HSA contribution limits are rising substantially. And you may want to push yourself to take advantage of that.

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Introducing the new HSA limits

Right now, HSAs max out at $3,850 for individuals and $7,750 for families. In 2024, these limits will rise to $4,150 and $8,300, respectively.

There's also a $1,000 catch-up contribution option for HSAs, similar to the catch-up offered for IRAs. Only with an IRA, that catch-up becomes available starting at age 50. With an HSA, it only first becomes available at 55.

Max out your 2024 HSA if you can

Maxing out next year's HSA could result in a world of tax savings. That's because HSAs offer not only tax-free contributions, but tax-free gains, as well, on invested balances and tax-free withdrawals for medical expenses.

Because you're able to invest your HSA funds tax-free, it's a good idea to max out your annual contributions and then reserve that money for retirement, when you're likely to need it the most. Not only can healthcare under Medicare be quite expensive, but health issues tend to arise as people age. So the most strategic thing to do with your HSA might be to fund it now (ideally at maximum capacity) and then hang onto that money for your senior years.

Another great thing about HSAs is that if you happen to wind up with excess funds in retirement, you have options that don't involve a financial penalty. Once you turn 65, your HSA effectively converts to a traditional IRA or 401(k) plan for non-medical withdrawals.

In other words, if you remove money from your HSA at age 65 or beyond for a non-qualifying expense, you won't be penalized on that sum. You'll only have to pay taxes on it. So either way, that's a win.

Gear up to contribute more

The IRS commonly doesn't announce IRA and 401(k) contributions limits until later on in the year, so as of now, we don't know what it will mean to max out one of these retirement plans for 2024. But we do know what next year's HSA limits look like. So you should take the opportunity now to start mapping out a 2024 budget that will allow you to max out your HSA contributions.

Doing so could really lead to a far more financially stable retirement. Also, you never know when a major medical expense might crop up during your working years. Even if you have to tap your HSA before retirement arrives, you're better off going that route than ending up with medical debt.