Should I contribute to an HSA?

[Andrew9141]

I am 22 years old. I have all debt paid off and currently working towards increasing my savings rate.

I still fall under my parents health insurance (no cost to me) until age 26. My workplace offers an HSA with a roughly 100$/month premium. 800$/yr company contribution.

Should I begin funding the HSA now or wait until i'm 26?

[thesis]

Good question. I wish I had been asking questions like this when I was your age! :)

Considering the fact that you are getting free health insurance right now, you would technically be paying money to switch to your employer's plan and contribute to an HSA. And contributing to an HSA is a great thing, but again, you would essentially be paying to do so.

Does your employer offer a 401(k) or similar plan and have a match? I'd contribute to that first, or even just build up a decent amount of savings. Check out the Investment Order thread over in Investor Alley: https://forum.mrmoneymustache.com/investor-alley/investment-order/

[frugaldrummer]

Is it really an HSA ( which goes with you when you leave) or an FSA (different rules may apply). Do you really qualify for the HSA (I thought you had to have an HSA compliant health plan to qualify, if you're not insured through your work you might not qualify for the HSA. )

If the answer to everything is yes, it's an HSA that goes with you when you leave and you do qualify then hell  yes! It's the best investment you could possibly make. Money for free from your employer, grows tax free and withdraws tax free for healthcare ( including dental and alternative health care like acupuncture).

[nereo]

A good deal of whether this would be 'worth it' to you depends on whether contributions are made pre-payroll tax by your employer, and whether you are single or married.  If so, this is a 15.3% 'savings' over other tax-advantaged accounts (eg a tIRA or 401(k)).

If you are single the maximum contribution is $3500/yr ($7,000 married).  So if you are single you save $535.50 in payroll taxes, plus whatever it does to lower your taxable burden.  If you are married you will save double that ($1071) assuming you max out your contributions.  If your marginal tax rate is 22% you could save an additional $770 (single) / $1,540 (married). Obviously less if you are in a lower bracket.

On the 'cost' side your premiums will be 'about' $100/mo, or $1,200. 
So from a purely cost-benefit calculation you will roughly break even if you are single, but you could save over $1,000 in taxes if you are married.

This of course doesn't take into account things like participating in a company-match for a 401(k) (do it!), nor does it address possible healthcare *costs* should you need medical treatment (you'd have to compare costs under your company's plan vs your parents plan).  It also doesn't factor in savings to your parents, which may or may not be important or significant to you/them.

tl;dr - it's likely a wash if you are single, it will save you some money if you are married, though currently that burden is being shouldered by your parents.

[Andrew9141]

Good question. I wish I had been asking questions like this when I was your age! :)

Considering the fact that you are getting free health insurance right now, you would technically be paying money to switch to your employer's plan and contribute to an HSA. And contributing to an HSA is a great thing, but again, you would essentially be paying to do so.

Does your employer offer a 401(k) or similar plan and have a match? I'd contribute to that first, or even just build up a decent amount of savings. Check out the Investment Order thread over in Investor Alley: https://forum.mrmoneymustache.com/investor-alley/investment-order/

Thanks sincerely, and thanks to all!

[ixtap]

A good deal of whether this would be 'worth it' to you depends on whether contributions are made pre-payroll tax by your employer, and whether you are single or married.  If so, this is a 15.3% 'savings' over other tax-advantaged accounts (eg a tIRA or 401(k)).

If you are single the maximum contribution is $3500/yr ($7,000 married).  So if you are single you save $535.50 in payroll taxes, plus whatever it does to lower your taxable burden.  If you are married you will save double that ($1071) assuming you max out your contributions.  If your marginal tax rate is 22% you could save an additional $770 (single) / $1,540 (married). Obviously less if you are in a lower bracket.

On the 'cost' side your premiums will be 'about' $100/mo, or $1,200. 
So from a purely cost-benefit calculation you will roughly break even if you are single, but you could save over $1,000 in taxes if you are married.

This of course doesn't take into account things like participating in a company-match for a 401(k) (do it!), nor does it address possible healthcare *costs* should you need medical treatment (you'd have to compare costs under your company's plan vs your parents plan).  It also doesn't factor in savings to your parents, which may or may not be important or significant to you/them.

tl;dr - it's likely a wash if you are single, it will save you some money if you are married, though currently that burden is being shouldered by your parents.

How do you figure that you are saving both halves of payroll taxes? OP is clearly not self employed.

[MDM]

I am 22 years old. I have all debt paid off and currently working towards increasing my savings rate.

I still fall under my parents health insurance (no cost to me) until age 26. My workplace offers an HSA with a roughly 100$/month premium. 800$/yr company contribution.

Is your parents' insurance an HDHP, and are you not their dependent?  If so, you may contribute the family maximum to your own HSA.

If you are covered by a non-HDHP plan (e.g., your parents' plan if that's what it is), then you may not open your own HSA even if you buy an HDHP plan for yourself.  You would need to have your parents drop you from their non-HDHP plan, become "not their dependent", and buy your own HDHP, before you could open your own HSA.

[therethere]

If you have a full-time, salaried job (unclear from posting), have you asked whether your parents want to continue to cover you? Depending on what type of plan they have it could be costing them very little, or a lot. Just a thought. It would obviously cost you more money. But it would also be freeing your ties to the nest.

I'd start there and get their thoughts on the situation. I wouldn't flat out assume that they want to cover you until you're 26.