@ir63 wrote:
Can she make a full HSA contribution in 2023 and full contribution in 2024 if she keeps her plan for the entire 2024?
More or less.
For 2023, your contribution limit is $3850 + $1000 catchup provision for over age 55, assuming you remain covered by a single HDHP for the entire year.
For 2023, if your wife is covered by a single HDHP starting on or before 12/1/23, and she remains covered by a single HDHP for all of 2024, her limit for 2023 is $3850. If her 55th birthday is on or before 12/31/23, she also gets a $1000 catchup contribution, for a total of $4850. If not, her limit is $3850.
For 2024, the limits for self-only coverage are $4150, plus $1000 if over 55 on the last day of the year. If you change plans before the end of 2024, your 2024 limit will be pro-rated. If your spouse changes plans before the end of 2024, her 2024 limit will be pro-rated AND she will pay a penalty for the portion of her 2023 contributions that are retroactively considered excess.
All contributions count toward the limit, including free money or match from the employer, voluntary payroll contributions, or after-tax contributions that you make directly to the HSA bank. You will get the largest tax savings from payroll contributions, since they are also exempt from social security and medicare tax.
In general, I recommend maximizing your HSA contributions before contributing to an IRA or 401k. Once you contribute funds to an HSA, you may use them for qualified medical expenses at any time, even if you are no longer eligible to make new contributions. And when you turn 65, HSA funds can be withdrawn for any reason and you only pay regular income tax, like an IRA, but if you use them for medical expenses, they are tax-free. It's like a super-IRA.
