Let's talk about the next thing that we ought to be thinking about as we move towards the year-end. We want to make sure that we're maximizing our tax-free money opportunities. This is step five of the
financial order of operations, where we're talking about putting up Roth dollars and building up dollars in health savings accounts. Well, the first one we'll focus on is the health savings account because they are triple tax-advantage. Remember, you get a tax deduction when you make the contribution, and most people take advantage of that one, but there's only a small select group that takes it to the next level. It means that you can actually let your money grow tax-deferred, and then, if you pull it out for actual medical expenses, it can be pulled out completely tax-free. So that's an incredible benefit, and a lot of people don't realize when you make that contribution, you can actually put in as a single individual $3,850; as a family, you can put in $7,750. This is the great thing about HSAs—swiping away here—it's just like $7,750 bucks for the family. These are deductible expenses, that's exactly right.
To be able to do that, though, you have to make sure that you are participating in a high deductible Health Plan. Just because you want to do an HSA doesn't necessarily mean that you should. But one of the great things about year-end is most of us come through our open enrollment period at the year-end. So you ought to be analyzing what type of health insurance plan makes the most sense for me. How do I know which one is the most beneficial? You can kind of line up some health insurance costs, like what's the difference in premiums between the high deductible plan and the non-high deductible plan based on my insurance consumption. What are my out-of-pocket expenses going to be with a high deductible plan? What will it be if I do the Cadillac plan with copays? What are the employer incentives? Are they going to put money in? And ultimately, what are the tax savings from doing the HSA? If I can line up those four different variables and I can do the math on that, I can very easily determine annually which health insurance will likely make the most sense for me next year. Again, just because you did one plan last year does not mean that that's necessarily the best plan for you moving into the next year.
And let me do a PSA for all my financial meetings. I think you put a lot of pressure on yourself that you've got to always max out the high deductible health plan so you can do the HSA contributions because you've heard us get all excited about the triple tax advantage. But look, I'm also realistic. In those years that you're having children or growing your family, medical expenses might be, and you know they're coming; they're going to be large. It's okay if you take advantage of the open enrollment ability to change from Cadillac insurance or just traditional insurance with a copay versus jumping into the high deductible where essentially you're not really getting a lot of coverage. What happens if I really have a medical thing that limits your out-of-pocket limits, but it also gives you discounts on all your coverage? There's nothing wrong with looking at your specific needs and maximizing the opportunity.
Okay, so health savings accounts—that's one way to build tax-free dollars. But another way that you can build tax-free dollars is actually through Roth IRAs. A great assessment that you can do at the end of the year. Where am I from an income standpoint? Am I actually going to be eligible to put money into a Roth IRA? And as a reminder for folks under 50 in 2023, you can do $6,500 into a Roth, and for folks over 50, you can do an extra $1,000 for $7,500. But only certain individuals with certain income levels can contribute. Once you are at $218,000 of modified adjusted gross income for couples or $138,000 for single individuals, you begin to phase out your ability to do direct Roth contributions.
So it's also a really good time to say, "Okay, I put money into a Roth this year, but I got a bonus that I didn't expect, or my commissions were higher. I had a better year than I anticipated." If that's the case, you're certainly going to want to try to undo those contributions before you file your tax return next year because man, is it a lot easier to do it before your taxes have actually been filed. I do want to tweak one quick thing. It's also people who turn 50, so anybody who's more—it's not 50, it's not over 50. It's actually when you turn 50. So I resemble this, so I'm very sensitive to all my fellow 1973 babies out there. Get excited; it's catch-up contribution time. So that's one of those things to pay attention to.
But the last thing, Bo, just to kind of close this out. There are some of you who got so excited about us talking about Roth contributions that you directly contributed. And then, what do you know? You got promoted; you got a bonus; your income was higher than those thresholds that Bo shared. This is the time to unwind that because this could be much easier to unwind before the tax year closes before all those statements and things are reported to the IRS or go out. It's much easier to fix it right now. But even if you are over that income limit, you still may be able to do backdoor Roth contributions. So there are even ways for higher-income individuals if you have the appropriate account set up that you can still get Roth dollars growing. And we love, love, love tax-free growth, so make sure that you're not missing this step of the
financial order of operations. The end of the year is a great time to begin thinking about. For more information, check out our
free resources 
