How to Set Aside Money if You Have a High Deductible

Your deductible is one of the key factors you need to know when budgeting for your health costs each year. While a high deductible health plan, or HDHP, can help keep your monthly premiums low, it can put a major strain on your pockets when health expenses do pop up. However, there are ways to plan ahead and set money aside to make sure that your high deductible health plan works for you and your family. 

What Constitutes a High Deductible Health Plan? 

So, what exactly is a high deductible health plan? As you might have guessed, these plans have a higher deductible than average, but they also come with certain benefits to offset their costs. 

According to the IRS rules for 2025, HDHPs need to have deductibles of at least $1,650 for individual policies and $3,300 for family policies. They also need out-of-pocket maximums of $8,300 for individuals and $16,600 for families. 

Key Advantages of Enrolling in an HDHP 

Although having a large deductible can sound a bit daunting, it actually has a few key benefits. Namely, larger deductibles usually come with lower premiums. They can help you keep health care costs low by reducing your monthly premium. If you only need basic care with standard co-pays, compared to more involved and expensive services, HDHPs can help you save. You’ll still have insurance in place if you end up having a serious health expense, but you won’t have to deal with a high monthly premium. 

HDHPs are also the only types of health insurance policies that are HSA-eligible. A health savings account (HSA) is a special, pre-tax savings account that you can use for certain medical expenses. Because HSAs use money from your paycheck before it’s taxed, you ultimately pay less for your healthcare. The government designed HSAs as an incentive to make everyday healthcare more affordable for people who use HDHPs. 

HSA vs. FSA: Understanding the Differences 

HSA plans are personal accounts you can grow and contribute to while enrolled in an HDHP. However, they aren’t the only type of savings account for healthcare expenses. Flexible savings accounts (FSAs) are another popular option you should know about. 

They also have a few key differences. You own your HSA account and the money in it, even if you get your insurance through your employer. Meanwhile, FSAs are employer-sponsored policies, and they don’t usually follow you when you leave your job. With your HSA, your money rolls over every year for you to keep, accumulate, and even invest. FSA funds typically expire at the end of the year, although restrictions may change from employer to employer. 

Keep in mind that you can’t contribute to both an HSA and an FSA at the same time. For example, you may have had an HDHP with an HSA through the marketplace. Then, you get hired by a company that offers a more standard insurance plan, plus an FSA. You’ll still be able to keep your HSA for future use, but you’ll only be able to contribute to your FSA once you switch away from your HDHP. 

Planning for the Future with Your HSA 

HSAs aren’t just a good way to set aside money for your ongoing health expenses. They can also benefit your budget in the long term. You can actually invest a certain amount of the money in your HSA, allowing it to grow tax-free. That way, you’ll be prepared for any health expenses that pop up in the future. As you get older and your health needs become more complex, you’ll be glad to have a large nest egg in your HSA. Plus, you can also use HSAs for your kids, so even if your personal health costs are low, you’ll be able to keep your whole family healthy. 

Strategies for Smart Saving and Investing 

Want to use your HDHP to make the most of every dollar? With a bit of planning, you can save for emergency health expenses and beyond. 

Long-Term Benefits of HSAs in Retirement Planning 

You can withdraw money from your account at any time, but you’ll have to pay a pretty decent tax penalty if you’re younger than 65. After you hit 65, you’ll actually be able to withdraw that money tax-free. At that point, you don’t just have to spend the money on healthcare; you can use it for anything you want. That means HSAs can double as alternative retirement savings accounts. 

How HSAs Can Aid in Tax Savings 

HSAs are famous for having a triple tax advantage. Here are the three ways it can help you save on your taxes: 

• You don’t pay taxes on the money you contribute. 

• The money can grow in your account tax-free. 

• You can withdraw money tax-free for qualified expenses. 

Making the Most of Your HSA Contributions 

If you have an HDHP, you want to make sure you’re using your HSA wisely. Here are a few key tips for maximizing the benefits of your account so you can pay for any health expenses and let your account grow. 

Check Maximum Contribution Limits 

There’s a limit to how much you can put into your HSA each year. Check out information from the IRS to learn the limit for your individual and family plan. You always want to contribute as much as possible to max out your tax benefits. 

Map Out Your Health Costs 

You may not be able to contribute the entire maximum amount every year, and that’s totally okay. You want to find the right balance to save up a good amount without straining your daily budget. Try to look at how much you spend on healthcare in previous years, then use that as your contribution goal. If your costs vary and you don’t have a good way to estimate, start by trying to contribute the cost of your deductible. That way, you’ll have enough saved to tide you over until your insurance can fully kick in. 

Save on Small Expenses 

Many people choose HDHPs because they have low monthly premiums, so they may not think they can afford extra contributions to their health plan with HSAs. However, there are tons of ways to save on little things so you can invest in your future. You’ll not only have more money for your deductible and other health costs but will be able to save additional money for other areas of your life. Further, you can get rid of other miscellaneous bills, such as streaming subscriptions or online memberships. 

Need Help with Health Insurance in California? Freeway Can Help 

If you want to start enjoying the benefits of your HSA-eligible HDHP, you need to find the right plan. MediCal, California’s healthcare marketplace, makes it easy to find the right insurance so you can start saving. However, you may still want a bit of guidance to make sure you pick a policy that works for you and your savings goals. 

At Freeway, we understand the ins and outs of HDHPs, HSAs, and beyond. Set up your California health insurance today calling us at 877-423-1508. This is a free service to help you and your family get the right coverage for you.