Reduce Healthcare Costs and Save For Retirement in One Mighty Little Health Savings Account

Here’s one financial decision you will not regret:  enrolling in a Health Savings Account (HSA) at work to reduce your healthcare costs.

Learn about the triple tax-reducing power of the Health Savings Account to lower your healthcare costs, and how it can help pay for health expenses from your early career all the way through retirement.

It may sound too good to be true, but not so, as wealth strategist Josh Weller, AIF® RICP® explains.

If you can afford to enroll and contribute to an HSA, you should. And you should contribute at the maximum affordable level.

A FEW ADDITIONAL POINTS NOT COVERED IN THE VIDEO:

  • There are no income limits for eligibility in Health Savings Accounts. This is refreshing news for high earners, especially those living in high tax regions, the most notable being New York City. Keep in mind that you do need to enroll through your employer and have a high-deductible health insurance plan to qualify.
  • After reaching age 65, if you don’t need to use the assets in your HSA for healthcare, you can still withdraw the funds just as you would from a 401k or IRA, paying income taxes on withdrawals (that are not used for health expenses).
  • Similar to a 401k, some companies offer matching contributions to employee Health Savings Accounts. Congratulations if you work for such an employer!

TRANSCRIPT:
Today we’re talking about one of my favorite subjects, the mighty little Health Savings Account known as an HSA.

Health Savings Accounts are available from employers who offer good benefits programs, including high deductible health insurance plans, which is a requirement of participation in a Health Savings Account.

The Health Savings Account reminds me of the old cartoon Mighty Mouse, because it appears like a little benefit, but it packs a mighty tax advantage value, including both immediate and long-term assistance in reducing health care costs. Incredibly, you save on taxes three ways.

First of all, like a 401k, you contribute pretax dollars to HSAs. You get a tax deduction upfront. Secondly, you can invest the assets in your HSA account and any capital growth in appreciation of the assets is tax deferred. And third, when you use the account to pay for medical expenses, you use those dollars tax-free. Tax deductible contributions, tax-deferred growth and tax-free distributions from the account for health care expenses.

Sounds too good to be true, but believe it or not, we’re just getting started because you can roll over your assets in an HSA year after year after year. In 2022, the annual contribution max for individuals is $3,650. For families, it’s $7,300 and folks 55 and over can contribute an additional $1,000 per year.

So imagine this. Let’s say you’re contributing $7,300 every year as a family and you’re blessed and you don’t really have to use the account that much for health care expenses. So you’re saving and year after year you’re rolling over the amount in the HSA and let’s say you save $150,000 to $200,000 in your family HSAs by the time you retire. Now you can use that capital to pay for long-term care insurance or other health needs in retirement, tax-free, including dental, eye exams, COBRA insurance, Medicare premiums and deductibles, all tax-free.

It’s the Mighty Mouse of personal finance and a very important way for you to reduce health care costs and potentially enhance your retirement planning. I’m Josh Weller, thanks for watching.

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