The BMC 401(k) Savings Plan and a Health Savings Account (HSA) allow you to save a lot of money every year. If you can’t afford to max out your contributions to both accounts, how do you decide how much to allocate to your 401(k) and how much to set aside in your HSA?
You are eligible to contribute to a Health Savings Account if you are covered under the BCBSTX HSA medical plan option. The law limits how much you can contribute to your 401(k) and HSA each year. Maxing out on your contributions to both accounts each year is great if you can do it. But if you can’t afford to set aside that much, here’s how to decide how to allocate your money.
Step 1 – Take Care of the Basics
Your 401(k) – Fidelity recommends saving at least the equivalent of 15% of your income for retirement, including BMC’s contribution, throughout your career. A good starting point is to make sure you are contributing at least 5% of your pay to take advantage of BMC’s matching contribution to your account.
Your HSA – It’s also important to set aside at least enough to cover this year’s medical expenses in your HSA. Most people spend at least some money on health care every year, whether it’s a visit to a walk-in clinic or something more serious. Think about how much money you spent last year, and try to contribute at least that amount to your HSA.
If you’re not sure how much you spend on health care, consider contributing the amount of your deductible to your HSA as a starting point. If you don’t spend it all this year, you won’t lose it—that’s one of the benefits of saving in an HSA; the money is yours until you need it, even if you change jobs.
Step 2 – Max Out Your HSA
Once you’ve saved enough to get the BMC match in your 401(k) and cover your health care expenses in your HSA, you can focus on maxing out your HSA. Why not put more money into your 401(k) next? Because your HSA is a powerful tool to help you save for retirement. Your HSA and 401(k) have the same tax advantage when you put the money in—you trim your federal income tax bill this year. But they are not the same when you take the money out.
With a 401(k), you pay federal income tax on the money when you withdraw it, no matter what you do with it. With an HSA, you don’t owe federal income taxes on withdrawals, as long as you use them for qualified medical expenses. Watch this Benetube video to learn more about the benefits of contributing more to your Health Savings Account.
Step 3 – Max Out Your 401(k)
Once you’ve maxed out your HSA contributions, focus on contributing up to the maximum in your 401(k) as well. Once you get there, congratulations! You’ve made the most of your workplace savings.
Useful Links
5 Ways HSAs Can Fortify Your Retirement, from Fidelity.
Source: Fidelity
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The content on this site includes links to tools and information that are not the property of BMC Software, and BMC Software is not responsible for their accuracy, completeness or continued availability. Some of the material contained in this site is based on official plan documents. It is not, nor is it intended to be, the legal plan document or a contract between the company and any employee or contractor. Every effort has been made to ensure the accuracy of this material. In the unlikely event that there is a discrepancy between the site and the official plan documents, the official plan documents will control. BMC Software reserves the right to amend or terminate the plan(s) or program(s) at any time. If you believe the benefits do not describe those available to you, contact the Benefits Center at 877-BMC-4849.
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