***Lively has started charging $24 or forces you to hold a minimum of $3,000 in their HSA. Due to this change, I do NOT recommend them any longer. Please do not use this company. A Fidelity HSA is currently free at this time***
An HSA (Health Savings Account) is one of the best investment accounts available to someone pursuing Financial Independence or Early Retirement. Although the name has “health savings” in it you should treat it like a “health investment” account to get the full benefits they offer.
Someone who isn’t pursuing FIRE can still take advantage of the benefits as well. When you use an HSA account you get access to triple tax savings. Not only do you avoid paying taxes when the money goes into the account, but you also skip out on paying taxes on the growth of your investments and when money is withdrawn from the account.
The fact that you’re able to invest money within an HSA is another added bonus as well. If you instead use this account as an additional retirement account by investing the money then you could grow your account to over $300,000 as a single person or over $680,000 as a family.
In this video, I’ll break down everything you need to know about an HSA and how to turn it into the ultimate wealth building machine.
The 5 biggest HSA mistakes too many people make:
Fidelity HSA:
Index Fund Investing Explained:
HSA qualified medical expenses:
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Disclaimer: This video is for entertainment purposes only. Everyone’s situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio. Always remember that incentives determine the type of advice they give you so one that charges an hourly fee is less likely to be problematic.
#HealthSavingsAccount #HSAAccounts…(read more)
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The TRUTH About an HSA For Financial Independence – Health Savings Account Investing
When it comes to achieving financial independence, there are many strategies and tools available to help you along the way. One often overlooked option is investing in a Health Savings Account (HSA). An HSA is a tax-advantaged savings account that is specifically designated for healthcare expenses. However, with a little bit of knowledge and planning, an HSA can also serve as a powerful tool for building wealth and achieving financial independence.
The first and most important thing to understand about an HSA is its tax advantages. Contributions to an HSA are tax-deductible, meaning you can reduce your taxable income by the amount contributed. Additionally, any growth within the account is tax-free, and withdrawals for qualified medical expenses are also tax-free. This triple-tax advantage makes an HSA one of the most powerful tools in the tax planning arsenal.
But what sets an HSA apart from a regular savings account or even an Individual retirement account (IRA)? The beauty of an HSA lies in its unique combination of short-term benefits and long-term potential. Unlike an IRA, there are no penalties for withdrawing funds from an HSA at any age, as long as the expenses are medical in nature. This flexibility allows you to use the funds to cover medical costs as they arise, without having to worry about early withdrawal penalties.
Furthermore, the unused funds in an HSA can be invested, providing the opportunity for growth and compounding over time. Many HSA providers offer a wide range of investment options, including stocks, bonds, and mutual funds. By investing your HSA funds wisely, you can take advantage of market growth and potentially outpace the rising cost of healthcare.
It’s important to note that not all HSA providers offer investment options, and some may have higher fees or restrictions. Researching and selecting the right HSA provider is crucial to ensure you have access to the investment opportunities you desire. Look for providers that offer low-cost investment options, such as index funds, and have a track record of strong customer service.
Another key consideration when using an HSA for financial independence is planning for the future. As you build your HSA balance, you may be tempted to use it to cover current healthcare expenses. While this is a valid use of the funds, it’s important to think long-term. By paying for medical expenses out-of-pocket and allowing your HSA to grow, you can create a powerful retirement healthcare fund. As healthcare costs continue to rise, having a dedicated fund to cover these expenses can provide a significant buffer in retirement.
In summary, an HSA can be a valuable tool for achieving financial independence. Its tax advantages, flexibility, and potential for growth make it an excellent vehicle for building wealth while also taking care of your healthcare needs. However, it’s crucial to carefully research and select the right HSA provider, as well as plan for the future by allowing your HSA to grow and using it strategically. With the right approach, an HSA can be a powerful ally on your journey to financial independence.
Hi Jarrod, thanks for this amazing video. I started watching your videos and have already started by HSA and investing it. I do have a question – can I use it to pay for my dependents’ healthcare after it has grown substantially even though when I started I had HSA only for me ?
Thank you so much for this info. When I have an HSA where my employer allows, how do I go about transferring it or is it called rollover? Should I wait till the end of the year todo this?and if I do transfer, what happens to the money that comes in next year in to that account? Thanks, new to all this and really appreciate any advice.
I've watched your videos on HSA and they inspired me to take this seriously. First big problem — my HSA funds were never invested!! I had an old
$2000 that was sitting to rot for years. (
Secondly my employer was using Health Equity HSA which forces you to keep $2000 in liquid cash instead of invested. I was able to transfer this out of my Health equity and into a Fidelity account so I can
Now I have $5000 in HSA funds invested in Fidelity. And collecting receipts… Thanks!!
I think what could be helpful is a guide to how to collect receipts…. What things need to be documented on the receipt? What is eligible. Etc.
As a beginner, I find your videos super helpful! So basically with an hsa, during retirement, the money is tax free for any medial purposes but takes normal income rate for non medical with no penalty, correct? What about dividends? Would dividends be tax free? Would the dividend payments be only toward medial as well? Thanks I’m advance for the help!
Good reward credit card. Triple tax free.
My old company didn't offer an HSA. But the company I work for the last 5 years does. I have saved $10K in it so far. I put in about $150 a month. Next year I will kick it up to $200 a Month and so on.
Thanks bro
Who is offering HSA with 7% yield?
If, if ,if, lot of its. No guarantees
so i can write off post tax contributions?
Great video. Thank you, Jarrad. Do you recommend ETFs or mutual funds? And are there any fees if someone decides to swap over an investment from an ETF to a mutual fund?
Hey, Jarrod, My employer does the deducting and contributes to the HSA bank. The two investment options at HSA bank that they offer are TD Ameritrade and Devers (I think). What it your recommendation?
So I can never have more than $3600 in the HSA? It would be more exciting if I could continue to invest, each year, another $3600 into it.
Jared, a lot of good info on your video and good suggestions on the comments. When my company offered this benefit in the Mid 90s I was sold on its tax benefits so maxed it out from day 1. When the investment option became available went all in on multiple index funds. What started out as a cushion for med expenses over time became much more. Over the last five years or so I started getting the hard sell on long term care insurance. Both from my regular insurance provider and my financial broker. They kept urging me to buy it as it was the last piece to protect my wife and my portfolios. The FP suggested that I pay the premiums from our HSA. After considering, I realized that if I didn't touch it as I had been doing for over 20 years it would continue to grow and in ten to 15 years would easily be worth more than an insurance policy that would cost us 9,000 bucks a year (2019). The clincher was the actual coverage the policy didn't provide. Both my broker and insurance agent advised against this strategy, both arguing that if we needed it sooner vs later it could be an issue. I told them I was willing to take that chance since the premiums were high and would only increase. My broker recently made a comment that he was envious of my HSA balance and its intended purpose if necessary. I have 20 plus years of receipts of out of pocket medical expenses that can be utilized if and when the time or need arises. Sadly very few employees where I worked take advantage of this great benefit. Most don't use it, a few contribute the minimum to recieve the company match. Before I retired I spoke with our HR manager about the participation rate and she gave similar figures that you provided. When I showed her my balance and what my plan was she was blown away. During open enrollment the last two years she has invited me to do a presentation on my HSA as an example of what's possible and the value of compounding tax free investments.
Word. Fidelity has such a trash interface
Thanks for the video! You mentioned that you use your regular saving to pay for your medical expenses. Those expenses are paid by the after-tax income, how would you justify this disadvantage of not using HSA account to pay for the medical expenses? Thanks!
It's worth noting that the difference between spending HSA funds vs. out of pocket is largely mitigated if you're investing that money you would have spent OOP elsewhere. In that case, the only difference is that HSA has additional tax benefits. That is significant, but not as much as it seems in the example. That said, if you're the kind of person who doesn't invest elsewhere (probably most people), this example is very relevant.
Where do you invest to get the 7+ return? I'm getting 1.75 with my credit union.
This is what I don't get, but maybe because I'm self employed. My HSA premium (if I selected the plan for 2023), would have been $285 a month with a deductible of $6,500. So I have to pay roughly $3,500 a year just to be able to put $3,600 into an HSA. Then if I get moderately sick or injured, I'm out of pocket $6,500 (deductible) + 3,500 (premium) = $10,000. What am I missing here? Or is it, eat healthy, go to the gym, avoid the doctors type mentality…?
I work for google and they encourage us to invest our HSA money which is awesome!!! Love the channel
Hi, great video! I am a 57 yr old flight attendant that works for an US based carrier that's living in Europe. So I decided this year to contribute 400 per month to my HSA that is provided by my employer( as well as my 401K). I plan to work at least 6-8 more years. I don't plan on touching it. After a certain age ( what age) am I able to use it for non-medical costs? I understand it will be taxed. How would I be able to invest the HSA if its through my company? thanks!