As HSA (Health Savings Account) eligible High Deductible Health Plans become more popular, and as tax laws adapt such that the HSA is an even more versatile tool for your finances, how can you optimize the way you contribute and use your HSA? We’re sharing three unique ways that you should consider implementing in your finances on this episode of Wise Money.
Season 7 Episode 28
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Kevin Korhorn, CFP® offers securities through Silver Oak Securities, Inc., Member FINRA/SIPC. Kevin offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. KFG Wealth Management, LLC dba Korhorn Financial Group and Silver Oak Securities, Inc. are not affiliated. Mike Bernard, CFP® and Joshua Gregory, CFP® offer advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results.
Intro: (0:00)
Segment 1: (0:11)
Break 1: (9:26)
Segment 2: (10:48)
Break 2: (20:06)
Segment 3: (21:56)
Break 3: (31:13)
Segment 4 (32:48)
Outro: (45:46)…(read more)
LEARN MORE ABOUT: IRA Accounts
CONVERTING IRA TO GOLD: Gold IRA Account
CONVERTING IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
A Health Savings Account (HSA) is a valuable tool for individuals looking to save for medical expenses while also enjoying tax benefits. However, simply opening an HSA is not enough – maximizing its benefits requires strategic planning and thoughtful contributions. Here are three ways to optimize how you contribute to an HSA:
1. Maximize your contributions: One of the key advantages of an HSA is the tax benefits it offers. Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses are tax-free. To fully leverage these benefits, aim to maximize your contributions each year. In 2021, the maximum annual contribution limit for an individual with self-only coverage is $3,600, and for those with family coverage, it is $7,200. By contributing the maximum amount allowed, you can lower your taxable income and grow your HSA balance for future medical expenses.
2. Take advantage of employer contributions: Many employers offer HSA contributions as part of their employee benefits package. Some employers may match a portion of your contributions, while others may make regular contributions on your behalf. Take full advantage of these employer contributions to boost your HSA balance without any additional effort on your part. Be sure to understand your employer’s contribution policy and take steps to maximize this benefit.
3. Invest your HSA funds: While HSA funds are typically held in a savings account, many HSA providers offer the option to invest a portion of your funds in mutual funds, stocks, or other investment vehicles. Investing your HSA funds can help them grow more quickly over time, potentially increasing your long-term savings for medical expenses. However, be mindful of investment risks and fees associated with investing your HSA funds. Consider your risk tolerance, investment goals, and time horizon before making investment decisions with your HSA.
In conclusion, optimizing your contributions to an HSA requires careful planning and strategic decision-making. By maximizing your contributions, taking advantage of employer contributions, and investing your HSA funds wisely, you can make the most of this valuable savings tool. Consult with a financial advisor or HSA provider for personalized guidance on how to optimize your HSA contributions and maximize your savings for future medical expenses.
To be clear, it's "the top 35 years of income based contributions …" the minimum to be eligible for SS is 40 quarters or 10 years of contribution.
The $1000 catch-up provision is a great reason not to open up a family HSA, but a separate HSA for each spouse.
Question: does an HSA account pass on to defined beneficiaries upon your death if you have money left in the account?
This information changed my life thank you.
Great content. Shoe boxing question: can you reimburse any medical expense or only expenses that were billed during a time that you had an HSA eligible plan. Consider if one year you chose a low deductible plan for medical reasons and you had several expenses that year which you chose to pay out of pocket. Can you reimburse that from your HSA later on in life?
It will be the first year for my mom to have HSA with a direct payroll contribution. She is 67. Can she still make a $1000 catch-up contribution?
Good suggestions here. I wasn't aware about the spouse being able to do their own $1k catch-up contributions. Love the idea of a separate HSA for the 20-something child. Also, a great catch to include the tip on the end of year HSA setup applying for the whole year. Surprised you did not mention the one time IRA to HSA conversion, which is also applicable for a spouse, so it can be done in two different years for a couple.
Gentlemen – How about a young adult child who is covered under their parents’ HDHP plan who is not claimed as a tax dependent? Under the ACA they have FAMILY coverage and are eligible to make their own $7,300 HSA contribution. Thoughts??
Question: If payroll deduction contribution avoids FICA, what happens if you make a direct contribution to the employee-provided HSA (e.g., making special direct contribution to max out for the year). Do you miss out on the (albeit small) FICA-avoidance benefit? PS You forgot to mention the once-lifetime transfer from IRA to HSA, which is huge oppo to move tax-free money and keep it tax-free even when used (must have HDHP for following 12 months, tho).