The Real TRUTH About An HSA - Health Savings Account Insane Benefits
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- Опубліковано 27 вер 2024
- **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**
Welcome to the guide on how an HSA can change your financial life forever. In this video, we're going to go over everything you need to know about a Health Savings Account so that you can turn it into the ultimate wealth-building machine.
We'll be talking about what an HSA is, the contribution limits for an HSA, how to supercharge your health savings account, how to invest money within your HSA, a comparison of what it looks like if you invest your money vs. not investing your money, triple tax savings on investment income (interest), tips and tricks to maximize a health savings account, mistakes to avoid with an HSA, and much more!
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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.
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Is there a reason you split your HSA between Fidelity and Lively?
Also, what if you get laid off...is it worth paying into it, given you are paying taxes, etc...?
I am with Health Equity, but getting tired of paying them nearly $100 per year. I am self-employed with roughly $33,800 in HSA and contribute the max single rate amount per year. I researched Fidelity, but can’t seem to find the “bottom line” regarding expenses. Hoping you can help: If do self invest, what are the annual fees? And is there a fee for buying investments when I send contribution each month?
Thank you
The only reason I split it between the two is to keep myself educated on how multiple providers work for the sake of being informed when creating content on UA-cam. If I wasn't a content creator then I'd have all my money in 1 HSA provider to simplify my finances.
A Fidelity HSA account does not charge any fees. They also have an account called a "Fidelity Go HSA" where they charge you a fee. The reason they charge you a fee with the "Go" account is because they manage the account for you. I do not recommend using this type of account.
@@JarradMorrow Thank you. I looked at them once upon a time, but wish their disclaimer was worded better - as it scared me away since it implied there were fees. Thank you for sharing your experience, and recommendation, as I am going to transfer funds to them. Thank you.
I did exactly the same thing some years ago. Transfer from Health Equity to Fidelity. Best move I ever made. Better fund choices and no fees. One thing to note. Even if you are 100% healthy in retirement and have no medical bills, you can still withdraw tax free every month to cover Medicare Part B premiums. For a married couple, that would be about $340 income every month tax free.
Thanks for sharing that additional info 👍🏻
I think you can reimburse yourself for all the out of pocket expenses you e paid as well track them. Fidelity has FidSafe for tracking.
I did the same. Fidelity. Bummed my CPA did not tell me about this years ago. I’m only 3 years in right now. Every Jan I pu the max in.
My employer uses health equity now...lmaooo ugh, but it is what it is.
I’ve had an HSA for years. I’m now starting on Medicare and will reimburse myself for the premiums. So glad I made that decision!
I had 3400 in my HSA. I invested it, then the market tanked. My daughter then had stomach problems, medical expenses came to a tune to $4800. This was a very tough time for me. I left the money in the HSA and it's still way down. Life sometimes doesn't work as you describe.
This is why you don’t invest money you need within a short period of time. Thanks for the reminder of that lesson 👍🏻
Yeah he nailed it. Have your emergency fund first, then start investing
I’m also sorry to hear about the stomach issue with your daughter. Hopefully she’s well and everything worked out from a health perspective.
Thanks guys, she's doing well. I have recovered and on my way to 3 months of emergency fund.
For that reason I always have enough cash for the deductible. Anything above that gets invested.
Great content. I maxed out my HSA as soon as it was offered at my employer and only dipped into the account once when my daughter had an appendicitis. I kept $3500 in the HSA cash account to avoid any fees and invested the rest in a growth fund. After 14 years of participation, when I retired last year I had $200,000, enough to cover our expected medical expenses for my wife and me for our retirement years without having to take taxable distributions from our IRAs. (We also have a LTC policy to cover possible nursing/home care.)
I'm about to start this now, great to see a real-life example!
@@jnordman86 Jesse, I am a retired CFO who started the HSA at my company. If you can max out your contributions and avoid using the funds as much as possible AND move your excess balance to investments, you will never regret it. I can’t tell you how great it feels to know I’ve saved for all/most of my retirement medical expenses. Good luck.
@@Paul-GrnHilawesome tip. I’ll do the same, thanks.
where or with whom did you invest your HSA money?
@@moens404 While working, my HSA was with HSA Bank. They have a regular cash account and different investment options; I chose a SP500 fund. Now that I am retired, I moved the account to a Fidelity HSA/SP500 fund.
Perfect timing with Open Enrollment happening! I can share this with my friends and fam instead of having to explain it myself 😊 Thank you!!
No problem. Hoping they find it helpful!
I have an HSA with Fidelity and had been investing a portion of my account balance. The better path for me after talking to an advisor from Fidelity was to have my full deductible available ($1500) as cash for medical expenses as I don't have a ton of disposable income. If/when the balance goes over the $1500, the contributions go to my investment account. I wish I had had one of these accounts when I was younger!
This is a great way to handle it. Thanks for sharing!
Me as well. Discovered late in my career but maxing out whatever years I have left to work. Not a single person in my building knew anything about it. Never heard of it. I learned from UA-cam videos and got started right away.
I retired at 63 3 years ago. I was fortunate that I recognized early on the multiple benefits of an HSA. I contributed the max every year for almost 17 years and invested 100% in diversified mutual funds. The last 12 months hasn't done well obviously but when the need to draw on it or to repay myself hits I'm well ahead of the game with the tax benefits and growth accrued. To me its an additional layer of protection or insurance with a great tax advantage. I never understood why many of my coworkers wouldn't take advantage of it.
Good explanation for newbees. One other flexible way to use HSA, is to keep ALL the medical receipts (that you pay out of pocket) over the years and when you are in a pinch, you can submit the old receipts to reimburse yourself (even if you are currently not having a medical expense). So if you need extra money for a sudden hawaiian vacation, you can turn in few old receipts and tap into that money. This is perfectly legal.
Good callout. It's something I mentioned in the follow up video to this one: ua-cam.com/video/tryBB7b7QTQ/v-deo.html
Seriously. yes. We've been maxing out our HSA for 4 years now (yes, I wish I started way earlier . . .).
Each year, we have way over $8k of reimbursable health expenses, that we have NOT taken.
The more the better.
When we retire, if we want, we can hold on to all those receipts and reimburse ourselves $40K or more . . .
Thanks so much! A great video for a noob like me! Just want to confirm I understand this right- you said that even when I am employed with my company, I can move my HSA a money to fidelity. Is this true? Thank you!
What about self employed people? Can we purchase our own HSA account?
Great video. I originally signed up for an HSA but found the reimbursement process confusing and inconvenient compared to traditional insurance. This makes a lot more sense.
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Good video! Three quick things: Unlike a traditional IRA, there are no required minimum distributions attached to an HSA account. This means you won't be draining the funds if you're healthy. The second thing is after your death your spouse (if named as beneficiary or designated as such in other estate documents) can use your account just as if it were their own HSA account. Third - once you enroll in Medicare, you won't be allowed to continue contributing to your HSA, although you can certainly continue investing and withdrawing. (These tips are subject to change, of course.)
Great callouts. Thanks for sharing 👍🏻
@Tina Lewis , so as a social security recipient and enrolled in Medicare ( still employed , so I have Kaiser Medical Insurance too ) … I can’t sign up for an HSA at open enrollment next month 🤔 ⁉️
One other thing. Upon the death of the account holder and the spouse, the beneficiary of the estate must pay income tax on the value of what remains in the HSA
@@tikimann9300 Per the IRS Publication 969: Qualifying for an HSA Contribution
To be an eligible individual and qualify for an HSA contribution, you must meet the following requirements.
• You are covered under a high deductible health plan
(HDHP), described later, on the first day of the month.
• You have no other health coverage except what is
permitted under Other health coverage, later.
• You aren’t enrolled in Medicare.
• You can’t be claimed as a dependent on someone
else’s 2021 tax return.
@@27ftWhaler Maybe. "Per the IRS Publication 969: If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse’s HSA after your death." This publication doesn't address what happens to the account if original owner and spouse are both deceased.
Another great feature of HSAs is that you can reimburse yourself for any out of pocket, qualified expenses made after the account was opened. That means, for example, if you spend $1000 on medical expenses, you can withdraw that money any time in the future to pay yourself back.
Thus, if Investor Ian kept receipts for that $115,000 in medical expenses he had, he could theoretically withdraw all of that money tax-free, after letting it grow for decades.
That's a super valuable point not made in the video! Save all your unreimbursed medical receipts into a gmail folder or google drive. Then in the future if you had to dip into the HSA, you could pull out money tax free up to the amount of your saved receipts.
Most HSA providers have a place for you to upload these receipts, too. Agree that this is a super valuable point and really thought he would highlight it in the video.
Wait what! This info is golden!!
exactly. And that is the biggest benefit of all. Just keep those receipts organized!
Why wouldn't you just pay the $1k with the account at the time of the cost being incurred?
Great video, lots of good info. I have maxed and invested my HSA for years. My employer just switched to wealthcare investments this past summer. Terrible option, the fees are aweful. I moved it all to fidelity. Keep the videos coming!!
Appreciate the feedback. Happy to hear you moved as much money as you could out of the high fee provider. I’ll make sure to warn people about Wealthcare’s high fees. Thanks for the info 👍🏻
Small point of clarification: the HSA contribution does on the tax return as an adjustment to income, not a deduction. This means it lowers your "adjusted gross income". It's better than a deduction.
Thank you for correcting me 👍🏻
@@JarradMorrow bro, are you limited on what you can invest in w HSA money? Can you invest in individual stonks, or only things like index funds??
Depends on the HSA provider bc they’re all different. With Health Equity i invested through their front end platform (not sure which brokerage they worked with on the back end) and I was limited to about 15-20 funds. With Fidelity and Lively I don’t see a limited amount of investment options so I guess you’re able to invest in anything
@@johnanon658 My company’s HSA provider has a small list of indexes. It’s not the worst, but could be better. I currently invest my HSA funds is SWPPX, Schwab’s SP500 index.
I was going to owe $600 for the 2021 tax year until I entered my HSA contribution in Turbo Tax. I got $1600 back instead. I max mine out every year.
Great video! Just a minor note for CA, NJ residents: Because these states do not recognize HSAs, your HSA contributions are not tax deductible for California/New Jersey state income tax.
Thank you for calling that out 👍🏻
Your talking about state taxes but not federal. I live in Virginia and am in low tax bracket so my federal income tax rate is 12% and state is 5%.
Yeah I was really surprised the video didnt bring up the fact that HSAs arent really beneficial in some states
@@Kay-kg6ny without a group of tax lawyers to search every state, it's almost impossible to check every law in every state.
Just remember that. High Deductible Health Plan requires all medical procedures, copays and dr’s visits to apply to the deductible. This typically increases the cost of care for the smaller items (Dr. Copays and prescription drugs). HDHP’s are really good for people who never use insurance throughout the year or someone who maxes out their deductible quickly- if you are in between I’d highly recommend talking to your employer or broker for guidance
Im glad you posted this- i was going to as well. Its important to be informed of all advantages and disadvantages before making a financial decision. High deductibles can be a big deal for someone who doesnt have sufficient cash available for annual medical expenses.
However, another thing to remember is that medical insurance premiums are cheaper for HDHPs than other health insurance plans.
I would talk to someone other than your corporate HR drone. They have no idea.
Exactly!
There are a few things that you have forgotten - 1. HDHP plans have significantly lower premiums. Thus, you are saving on fixed costs vs variable costs. 2. Often, not always, the annual out of pocket max is less than with other plans.
As some who has already had 2 operations in 2022 and another one in 2 weeks = the HDHP PPO has saved me $2480 from the Platimum PPO.
HDHP = $408 monthly premium + $7500 out of pocket max = $11896
Platinum PPO = $823 monthly premium + $4500 out of pocket max = $14376
With the same provider network.
@@Chris-hr2uj If you don't have a lot of cash, how are you going to pay the FIXED COST monthly premium???
I have Fidelity for both my HSA and 401K, and they charge a fee every quarter on both. Something else to add people need to be careful because HDHP is a health plan designed for people that seldom need to use their health insurance, so you're paying most of your expenses out of pocket. If you're older or have health issues, and you choose HDHP, you'll spend significantly more out of pocket for your medical care than a PPO.
This is the best video on HSA that I have ever seen, that it almost covers every thing that you need to know about HSA, good job!! I think I will forward it to my family.
Glad it was helpful and thank you for the feedback. Believe it or not I have more info I wanted to add, but it would just be too long 😂. That info will be covered in a follow-up video.
@@JarradMorrow looking forward to it!!
Great video. HSA is one of the best financial investments available. I max out my HSA out every year and pay all medical expenses out of pocket. I have moved the funds to an investment account and will use the funds later for Medicare premiums.
Thanks for sharing your feedback 👍🏻
I hope your not saying you don’t have insurance? If so, that Hsa will be gone a day into an accident or health issue.
@@krehbein He has insurance. Contributing to an HSA requires being enrolled in a high deductible health insurance plan.
I found the HSA to be far superior to my employer's high premium options. If you and your family are relatively healthy, the HSA is an easy choice, especially when an employer puts in money, too. I'm saving a few thousand every year easily.
Thanks for sharing your experience 👍🏻
I am stuck right now. My employer pays 100% of any insurance plan I want. I am 22 and have type one diabetes so I spend a lot of money on insulin and supplies. I am not sure if I should do a HDHP or a PPO.
I switched mine to fidelity and have it invested, love it especially with the fractional shares
Nice! The fractional share investing is extremely helpful. Keep up the great work!
The HSA is the best thing I could have ever come across! It's my money which is saved before it gets taxed. So it lowers my taxes at the end of the year. I then can you that money to invest or use it to spend on medical expenses. I used it to buy myself a pair of eyeglasses that cost $600. It never even touched my day to day money. The HSA single handedly removed the idea of me having to pay for medical expenses cause there is always money saved for it!
Now I'm going to be using it to finally get my orthodontics done
This is great! Thanks for sharing your success story!
It was your day to day money though! You are acting as if that was free money though!
I am super mad at the 7%. I think 6.99% is a much more realistic number.
😂 you would be mad about that. I need that extra .01% return so I don't go broke trying to feed all these damn birds I now have in my back yard
@@JarradMorrow 😂
I'm blaming you for showing me your bird feeder set up 😂. Expect a phone call from my future wife when she's pissed I'm spending more time on my birds than her.
This couldn’t have come at a better time. I’m 26, and milked the insurance benefits of my parents until the last possible moment. Now that I’m paying for my own insurance I started an HSA this year. I am putting in about $100 per paycheck and on top of company match I have about 1.6k invested and 1k that they make me hold in case I need it. Going to be contributing more as I earn more but it seems like a great resource to have!
Your lucky u could be on your parents policy till age 26. 😊
Question! If my Employer says they offer a 50% match that means if I request to have $500 added annually then I’d have $750 by the end of the year right?
@@Natasha_4 yes, sometimes they cap how much they contribute annually tho
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@@jdenino6022 everyone with parents who have insurance can be on their parents plan till the age of 26.
Jarrad I just started following you and to say you are dope is an understatement. Your delivery is just slow enough for even me to understand, yet makes me feel smarter and all the more empowered for seeing your videos to the end. My Wife and I have compared our insurance policies and have found out that me moving to her policy makes sense. With that said I'm thinking to take what I have in my current HSA (under $10,000) and invest it. Maybe in a 2 fund portfolio (guess who I got that idea from lol). Keep in mind I'm 52 yrs old. While I know your not a fin advisor I'd love to get you thoughts. Keep up the amazing work as you are doing great work with solid videos and a voice of sound doctrine.
I don't see any issue with investing that HSA money as long as you're able to afford all of your medical expenses on your wife's health insurance plan. Just make sure you're keeping track of all your medical expenses throughout the years (even if you're not enrolled in a HDHP) so you can cash out that HSA money tax free many years in the future. In case you haven't seen it yet, I lay out my receipt tracking process in this video ua-cam.com/video/Tj8MbBWsxzU/v-deo.html
I use to pay for the best plan, but I realized I never use my medical but always have issues with my dental. Went with the cheapest plan and did the math on the difference and put that amount away in my HSA. I have $10k sitting in my HSA instead of giving it away to the health insurance industry. Best investment is knowing that when I retire I have an account that's going to help me from having to choose between my medical care vs eating.
Best HSA video on UA-cam. Truly a game changer for me as a self employed live music industry worker and personal finance nerd. Thanks man.
HSA benefits are amazing! Child day care FSA is the bees knees too! One thing I learned about it is to let your benefit accrue and then file after you’ve had $X amount spent to file for the claims.
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I don’t understand the Child day care fsa hack. Can you expand?
I’ve had my HSA for quite some time and just increased it to more out of my check beginning Jan 1. This came right on time. Learned about things I could purchase on Amazon with my hsa as well which was nice to learn as it wasn’t really advertised.
Nice job increasing the amount you're contributing 👍🏻. Keep up the good work!
What could you purchase from Amazon on related to HSA ?
Ive been pretty diligent with the HSA. After retiring, I moved it to Fidelity. This has proved far better than the few investment opportunities offered by my former employer. After retirement, Ive continued to fully fund the HSA and plan to do a partial contribution pn my last half-year of eligibility.
The one thing I got out of this, as a self-employed person, is that I wasn't taking advantage of paying into my HSA with pre-tax dollars. Next year I'll fix that. Good vid.
Glad to hear it helped!
My provider uses Optum and requires $2k before being able to invest. The charge a small fee to invest but they charge a flat $40 to transfer money to another HSA. Also Although I am in CA where the gains are taxable, it’s still worth while for the tax deduction
$2,000?!??! Oh my gosh that would annoy me so much. AND they charge you to transfer money out?!?! Wow. Well if you ever leave that job then transfer all of your money to a new HSA provider to be done with Optum. Thanks for sharing your experience with this provider 👍🏻
Yeah, I have Optum as well. What I found is that I could open a Fidelity HSA and have Fidelity initiate a partial transfer from Optum (no fees charged when Fidelity pulls from Optum!!). For me, the first step was to cash out the funds in the Optum brokerage account and move that cash back to the general HSA account to stop the $3/month brokerage account fee… but then Optum has another fee if your HSA account drops below $500. Now I can do future partial transfers initiated from Fidelity pulling funds from Optum HSA. Also, just keep track of OOP medical expenses in a spreadsheet and saving receipts electronically. If you need cash in the future for some unforeseen issue, you can “pay yourself back” for past OOP expenses
im in the same boat with optum health. I have to leave 500 due to minimum they require and also thats where company contributes. The rest I move to Fidelity
@@wanderlust7020 How has this process been working for you? I'm in the same position with my employer/provider dealing with Optum and I'm glad to come across your post. I'm definitely going to look into this as well.
@@dennisr5673 initial process worked great! Just make sure your funds are in the Optum HSA (not Optum Brokerage). Then open a Fidelity HSA account (probably would work with Lively too, but I didn’t try that) and from Fidelity, initiate a PARTIAL transfer (not a full) and put the details of you Optum HSA account. Make sure to leave at least $500 in the Optum HSA to avoid being hit with a fee from Optum. That way your Optum HSA remains open to receive future deposits from your paychecks. I haven’t done additional partial transfers yet, but don’t expect any issues.
Hi Jared,
I work for the Federal Government. Open season is November 12-December 14. We have HDHP as options. Thanks for the information.
No problem 👍🏻
Great video! I’m an analyst for a healthcare brokerage. I’ve found that people that know how to use their HSA tend to love their HDHP coverage and the tax incentives!
Just because I didn’t see it in the video; an HDHP plan also only pays for preventive before meeting the deductible all other services will be 100% out of pocket until the deductible is met. Then the copays/coinsurance applies until the Out of Pocket Max is met. Also the SBC document you showed “from your employer” is actually from the carrier and all health plans will have this document.
Thanks for the info 👍🏻
I think the HSA is great for single people or young people with no major health complications. If you have serious health issues that require constant treatment or occasional hospitalizations you may end up spending more than what the HSA has or are still paying through the nose for healthcare depending on the plan.
I max out OOP every year... HSA is still the way to go.
A few things you didn’t touch on ( unless this has changed) is you can only move money between HSAa once a year without incurring fees. Also you might want to touch on strategies for keeping up with receipts for future reimbursements. Took me a while to assemble a plan that works well.
I also advise when paying out of pocket to use a cash back card for even better savings.
I moved money multiple times (at least 12 times in 2021) from Health Equity to Lively and Fidelity in 1 year without incurring any fees. I also mentioned in the video to pay with a cash back credit card when paying out of pocket. I broke down my receipt tracking process in this video: ua-cam.com/video/tryBB7b7QTQ/v-deo.html
@@JarradMorrow thanks! Must be based on financial institution. My last job had our HSA with a bank that didn’t allow any investing at all. I had to pay a fee to move money to another HSA so ended up doing a yearly transfer (which was free). Hated it. LOL
@@barmanvarn I think what you’re talking about is a rollover. That’s the one where you are only allowed to do once a year. Different than a transfer.
Rollover is where the money goes to you directly in order for you to manually put it into a different HSA account within 60 days I think.
The transfer one is where it’s directly transferred from one broker to another. That can be done unlimited times.
I've only had companies offer an HSA since 2018 so I still need to build up my accounts, but I am doing far better than I was in my 20's so I'm hoping I can find a few new incomes streams to build out the investment accounts I have outside my employer related ones.
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Dave Ramsey's been teaching this for years. But has never taken the time to break it down in depth like this.
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I want to shout about the financial benefits of HSAs from the mountain tops. I'm so thrilled you're doing it for me!
Sounds like we both share the same love for an HSA 😂
@@JarradMorrow
Preach!
I may have missed this in the video. Did you mention that distributions are tax free (at any age) up to the total amount of past unreimbursed medical expenses, as long as those expenses are recorded with your HSA provider?
So one could build up their non-reimbursed expenses, and say, and be able to use up to that amount tax free, for any purpose, in retirement. Or, if any emergency comes up between now and then, one can have an emergency fund in their HSA worth up to the amount of unreimbursed medical expenses they've accumulated.
I used my HSA account to pay for dental , medical and vision care. Money I will not be tax on but I use the money to pay for medical bills. A very smart program .
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This popped up on my recommendations page. Thank you!!! I’m going to have my husband look at his as I was the one who insisted on an HSA. Then he was using it for everything that fell under the, as he says ‘ok’d items in the handbook’! 🤦♀️. I have all the HSA cards now. He thought the money was gone at the end of the year and we started all over again. I explained it to him in simpler terms. We can afford our prescriptions. Brilliant video. We use our credit card for the same reason. Win-win! Cheers
Good luck on your channel man! I see great potential in it, and you cover such important topics I think more people should know about with a greater depth and important considerations than other content creators.
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The ability to open an HSA with a better company while retaining the employer-required account is something I'd never realized was possible! I sincerely dislike the company my employer is using, their online system is constantly broken and I still can't get a checking account connected for any kind of reimbursements. This is after several months of trying with support. Basic stuff they can't even handle. They also charge tons of fees that have gone up this year. I am looking into both Lively and Fidelity from here - thank you so much for this information!
Thanks for sharing your experience. Mind mentioning which HSA provider you’re describing so people can make sure to avoid them?
@@JarradMorrow Yes! OptumBank
I’ll make sure to share this info when I make another HSA video 👍🏻
@@JarradMorrow Thanks Jarrad, a rockstar as usual! 😁
I work in government and am unsure this is an option for me
I'm glad you mentioned near the end of the video the use of a cc to pay your medical expenses. I do this for the cc sign up bonuses. Just pay it off before you pay any interest!
Also, check the list of what is an allowable medical expense, it's more than you might think.
Good info 👍
Great points. Thanks for sharing the additional commentary 👍🏻
Great video as usual and great advice. I used to keep a minimal amount in my HSA (basically, only the amount of the HDHP deductible/out of pocket) until I realized how much money I was leaving on the table. I’m also in my mid 50s, so I will soon be able to treat this as another form of retirement account (I already max out our 401k’s).
I'm creeping up on 40 and was doing the same thing.
You left out one of the biggest advantages with long-game HSAs. If you save the receipts for all those medical bills paid out of pocket you can cash them in at any point, tax free and penalty free. This lets you treat your HSA as a secondary emergency fund earlier in life and a slush fund to pay for splurges once its growth has become self sustaining.
Sounds like you didn’t watch until the end because I did mention the receipts 😂
I have had access to an HSA for the past 2 years, and I am maxing it out at the beginning of every year! One of the most strategic "retirement" accounts you can have!
I'm currently 29, and had some investments in my roth ira and HSA accounts that did really well. Now currently worth 7 figures and my hsa has 6 figures in it. Its been a big blessing especially when my son was born because hospital fees were not cheap.
How much TSLA you holding lol
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@@reynolds619 none lol I’ve actually never owned it. I did however own a large position on GME before Reddit discovered it and sold it near the peak. So I got lucky. Now adays I’m just in index funds.
@@kchal0 congrats that is awesome
The fact that this video needs to exist is insane. Imagine if we didn’t have any healthcare expenses passed the premium?! I’m on an HSA and contribute enough to nearly cover my 3k max out of pocket/year. And since medical costs are so insane it’s likely I’ll hit it next year. I signed up in September and I’m almost at 2k of expenses (my deductible is 1.5k) from just one (current) illness and few doctors appointments. Considering my paycheck isn’t enough to survive on my own in my city, it’s pretty crazy when you factor in missed pay at work and insane medical expenses. My savings goal is 6 months of full expenses + full out of pocket health insurance expenses. But i know from experience it’s probably better to have a year of expenses saved up, but that would take a very long time for me to do and I’m in a living situation that is good financially but awful for my physical and mental health.
You missed another key tactic for using an HSA. If you pay medical bills out of pocket, keep a picture of ALL receipts for everything you have paid. At any point in time you can reimburse yourself from your HSA.
For instance, let's say you paid $30K of medical bills out of pocket over the past 15 years. You can transfer $30K from your HSA (which has been growing tax deferred) to your bank account at any point in time later in life (if you have a the documentation of the medical bills).
So make a google drive folder immediately and just take pictures each year of medical expenses you pay out of pocket for documentation
Good callout. I showed my process for doing this in the video I linked up at the end of this one 👍🏻
I started doing this from broke 4 years ago. The HSA account out performs any of my other investments. I really hope people listen to you.
That has more to do with the investment you hold than it does the actual HSA. Glad to hear it’s working for you 👍🏻
Great information Jarrad. I'm the investor type contributing the max every year and just leave it to grow.
So smart! Just make sure you're tracking all of your medical receipts throughout the years so you can cash out that HSA money tax free in the future 👍🏻
@@JarradMorrow thank you. My goal is not to touch it paying my medical expenses outside HSA. I want it grow and be able to use it after retirement
Nice. I was surprised that, of the various Financial Institutions I contacted about opening an HSA on my own, none asked me if I qualified according to the IRS rules.
I have Fidelity and I prefer it. I have a Fidelity debit card "checking account" and so I can transfer money into the HSA whenever I want...
None of them did? Wow. When I opened an HSA with Lively and Fidelity they checked to make sure I was qualified.
@@JarradMorrow How did they check? What did they ask for?
They had me go through a multiple choice questionnaire and I had to give them some additional info. It's been a minute since I did it so I can't remember the exact details beyond that. Either way, it's probably not a good idea to attempt to open an HSA if you're not enrolled in a HDHP. You're just asking to get caught and audited by the IRS.
I just elected to start my HSA at 29 and was planning on using it this way. I will definitely have way more medical expenses in 30 years lol. Planning on using it as an extension on my retirement planning.
Smart 👍🏻
Thank you for the great videos! I was wondering how it works if your employer offers two insurance plans, but both can be considered high deductible under the IRS criteria you listed.
For example "regular plan" has 2000 deductable and 5500 OoPM. While the one listed as "HSA plan" has 3000 deductable and 5000 OoPM. Both qualify for the IRS minimums for being a HDHP.
I'd personally stick with the one listed as an "HSA plan" just to be safe, but it could be worth doing the extra work to verify that the other plan works as well
I just selected the HSA option at work...wish I would have done this early on in my career...in 30 years I'll be in my 90's -- and I hope I don't have to work at that age...but the information is really good and I feel more comfortable with my choice.
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I love my HSA. I invest all of it. I’m hoping to have a enough in that account to pay for healthcare expenses for the rest of my life in addition to having excess money in the account to use as a 3rd, 4th, or 5th main retirement account in general.
Thanks for sharing your experience!
@@JarradMorrow thanks! Great video too! It’s nice to see quality content about HSAs.
I've never been willing to choose the worst health insurance plan my employer offers, so I can't get an HSA.
Happy to hear you properly compared different health insurance options to pick one that works best for your lifestyle! Keep up the good work 😃👍🏻
As an individual, my employer's plan is essentially free either way so I didn't think it made much sense to go with the high deductible option, but it's a lot more to cover the family. With the money saved going for the high deductible plan, I can just put that into the HSA and even if I end up hitting the maximum out of pocket limit on health care for the year, I'm still better off. If I don't, then better yet.
I really wish the video pointed out how to handle “out of pocket” expenses, save receipts, can reimburse any time!
I'll show you exactly how to do that when my next video is released in a couple hours 👍🏻
Can you really keep your receipts and only take the reimbursement years later? I thought you had to get reimbursed the year of the expense.
This an absolute gem of a video. Thank you UA-cam algorithm for leading me here. Thanks Jarrad for the content. Amazing!
Glad you enjoyed it! And thanks for spelling me name right because not many people do 😂👍🏻
I thought HSA accounts didn't roll over and that the had to be used by the end of the year? Maybe I missed something or misunderstood something. And how do you roll your HSA account to an investment account, and not get dinged for not using the money for health care? I think I might need a slower explanation because I think I'm missing some important steps. LOL. I use to have an HSA account but I never ended up using the money in the acct and the medical supplies I tried to buy weren't approved, so I would end up losing the money. So, I don't choose HSA accts. But this interesting. Thanks for sharing!
Funds not being able to roll over from year to year has to do with an FSA. An HSA is completely different. A lot of people mix up the two so this is why I specifically called that out within the first 2 minutes of the video.
The HSA bank has investment options - you never ever touch that money outside the HSA bank account until withdrawing for medical costs.
@@tableround3019 Thank you for clarifying! :)
@@JarradMorrow oooooohhhhh! So, I was confused from the very start. I thought I had a HSA account but it really was a FSA. Geez, this is very confusing. Thanks for posting this helpful video and thanks for responding. 🙂
@@JarradMorrow So why would anyone invest in an FSA when HSA is available? I was confused between the two until my employer offered an HSA. The office manager explained to me that it was exempt from income, social security, and medicare taxes, and could be carried over from year to year. I had never heard of HSA before and only knew of FSA, which I thought was a ripoff.
Fantastic content Jarrad, wish I would’ve discovered your channel sooner! I’m working with Health Equity through my employer. I have some nice options with a few low cost target date funds. Already had to opt out of paper statements as it was a $5 per month fee. I will keep tabs on additional fees to see if it’s worth switching my HSA to an alternative investment vehicle. Fidelity would be a great option for me as it houses my other retirement accounts. I look forward to more great videos!
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Very helpful video! One quick question though: is it possible to only invest say half of the funds in your HSA to allow those to grow, then save the remainder of it to use for medical bills in the meantime? Or is it an all or nothing situation? Thanks again!
Great question. Yes, you can only choose to invest a portion of your money and leave the rest available in "cash". It's not an all or nothing type of deal
Yes, we don’t have the means to keep spare cash to pay for medical expenses, so at the end of the year we invest whatever HSA Money is left into index funds.
Did I miss EXACTLY how to invest the HSA funds while it’s in a HSA? Do we do this through the HSA provider? Do they have a medium buy Index Funds…. Now you have me thinking! Thanks.
Yes, you do this through your HSA provider. If you use Fidelity as your HSA provider then you of course use their brokerage platform. If you use another HSA provider then they may partner with a brokerage. With Health Equity I executed my trades through their front end platform (not sure which brokerage they worked with behind the scenes). With Lively they partner with Charles Schwab so you use that brokerage to execute trades on behalf of your HSA.
Can’t Thank you enough. You have done a Marvelous job especially on how to use the HSA set aside funds. Not many have explained this so excellently as you have done.
Glad it was helpful!
Hi Jarrad, I was completely sold on HSAs until I learned that 100% of HSA balance that is inherited by a non spouse beneficiary (ie my kids one day) is taxable immediately in the year of inheritance. What are your thoughts on this?
Doesn't concern me at all. An HSA is for YOU while YOU'RE alive so avoiding it just because your beneficiaries are going to have to pay taxes probably isn't the best way to look at it. If my beneficiaries want to bitch and moan about having to pay taxes on the buttloads of money I'm leaving them then I'll just donate it all to charity so no one will pay taxes and give them nothing 😂. Trust me, our heirs are going to be perfectly fine.
Lol well that’s one way to approach it. Definitely still a home run when combined with other investment vehicles like traditional 401k/Roth, just something to consider for those planning for their kids future’s in mind. Love the content.
You can also use HSA funds to pay for previous medical expenses if you saved all your receipts. I don't know the time limitations linked to it but it will help ensure you consume it
@@willburton2051 I definitely think about that. People could still benefit from a high deductible health plan with a HSA with lower premiums than a higher premium paying PPO plan. Especially when you find out that a lot of private practices file claims out of Network regardless of how platinum status your plan is.
I don’t contribute to my HSA anymore but my company still does. I mainly use the HSA as a tool rather than a savings for the reason you have mentioned.
@@moeck14 no time limits, currently
best advice I can give to someone starting out with their own benefits
Max out the HSA every year no matter what
Keep your deductible amount in the liquid portion of the HSA so that it automatically adjusts as withdrawals and deposits from payroll hit the account
Be as aggressive as possible - you should be aggressive in your 401k for most of your career too, but the HSA is a unique combination of tax benefits that suits itself well to 100% equity portfolios. Let the stock market do the work for you for the next 30-40 years
Thanks for sharing your thoughts 👍🏻
Can you apply these concepts to investing in an HSA post-taxes? I do not have an HSA available through my employer, but opened one that I'm contributing to after payroll taxes.
Yes you can! I mention this in the video, but if you have to contribute on your own then you will get a federal tax deduction when you file your taxes for the year. But you will not get a tax deduction for SSI and medicare like you would be able to if your employer was contributing from your paycheck. With just the federal tax savings an HSA is still beneficial so it's not necessarily a deal breaker.
My HSA contributions were auto deducted by my employer and had NO taxes withdrawn .. not even FICA (SS & Medicare)! People forget this but it’s over 7.5% of your check. Pre-tax 401k deductions do get the FICA taxes withdrawn! Of course you also don’t get credit for HSA contributions as SS Income. However in the long run for most this will be a nice plus! It’s truly THE best investment you can make! One other thing… you can use after age 65 to pay for Medicare premiums tax and penalty free. I believe LTC insurance premiums is another allowed tax-free use.
Thanks for sharing your thoughts.
Here's mine: Long term care insurance is trash. Stick with term life insurance if you need it 👍🏻😂
Utah gang represent
😂👍🏻
You missed what I think is the biggest benefit of an HSA. The law allows you to pay from your pocket and then take a qualified distribution from an HSA to refund that medical expense, but the law does not require you to remove the money from the HSA in the same year as the expense was incurred. So, if you keep your receipts, then after 30 years of growth, you can simply withdraw all your medical expenses over those 30 years from your HSA as a qualified distribution.
To me the biggest overlooked aspect is that you still have to pay for an insurance premium each month. My wife is a teacher, she has great insurance, and we will not lose it when we retire. Given that I'm not going to close her insurance plan, it's very unlikely that the tax benefits alone from the investment portion will outpace a roth ira, or my roth 401k, because with those accounts I am investing whatever I would've put in the HSA, plus the entire insurance premium
The tax benefit from an HSA is better than a Roth IRA and Roth 401k so technically it will outpace both of those accounts. Both of those roth accounts are contributed to with money that is already taxed...and HSA is contributed to pre-tax. Therefore, dollar for dollar, an HSA wins from a tax perspective. Thanks for sharing your opinion 👍🏻
@@JarradMorrow The investment balance would technically outpace a different account, assuming I put the same amount in both. That is the problem though. In order to get an HSA, I'd have to spend over 1k/year in insurance premiums. If I didn't buy insurance I don't need, I could take the money I would be putting towards a premium and add it to the invested balance, which would make it outpace an HSA much quicker
I plan on investing in this next year. I hate that I missed the deadline but I'm about to get on it
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24% tax bracket? You meant “effective tax rate of 24%” which can then be used to multiply the $500. … “graduated tax system” [19:05]
Best video I have seen so far that explains HSA.
Well dang. Wish I had come across this video earlier. The HSAs I had charged a fee but as long as I worked for the company - they paid for it. I left and was stuck with the fees. Had no idea I could transfer. 😢 Good to know going forward. Thanks!
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So worst case scenario once you are 65 is this account is essential the equivalent of a traditional/401k if you were to use the money for non medical?
Yes, exactly. I mentioned this towards the end of the video 👍🏻
Utah is so high becuse one of the largest HSA companies in the nation, HealthEquity, is located in the Salt Lake Valley area and many of the big silicone slopes companies utilize their services.
That was really great advice! One more thing that I plan on is if I'm like most of my family and I live into my 90s I will eventually need long term care. I plan on using my HSA for my long term care expenses when I am near the end of life, which given how I am maxing out my HSA will probably be enough to cover the full cost. Long term care (at this point in time) is one of the few health expenses not covered by Medicare, and long term care insurance generally lasts only a few years. My HSA will mean that if my long term care insurance runs out, which I will probably buy someday, I hopefully will be able to pay for the rest of the cost through my HSA, before touching my Roth IRA. The longer you go without withdrawing, the bigger the benefit you will have.
Why would you pay out-of-pocket cash that is already taxed instead with your HSA account with pre-taxed money?
Are you able to invest in the HSA accounts that are offered by any employers? Or is it just some HSA accounts like Fidelity that allow you to invest your HSA money?
Investing should be available in all HSAs
My employer's one has some investment funds you can put the money into, but you have to keep at least $1000 cash or they charge you $5 a month for the investment account. And of course, the funds themselves charge feeds that reduce their earnings.
Jarrad I'm doing EXACTLY what you are doing. Max it out every year plus 55 age catch up. Then invest it in a fidelity S & P 500 index fund. Won't need to touch it.
I dont have health insurance, can i still contribute to a HSA or im not allowed to at all? If i cannot is there a way to by pass and get a high deductible to contibute to an HSA?
I mentioned it many times that you cannot get around the HDHP part of an HSA
If you buy your own health insurance you can buy one within the HDHP limmits I would think. And your premium would be less expensive as well.
Paying for these expenses out of pocket completely negates the reason for having the HSA. I understand the reasoning, pay for the medical bills out of your HSA and replenish All while your balance in excess of your emergency HSA continues to be invested.
Thanks for bringing HSAs up, I’m from OH and try to tell everyone about the tax advantages as well
Be sure you carefully review the qualifying plans. Coverage may not be the same and cost more out of pocket if a crises happens.
So to invest $7,750 a year into your HSA for family coverage that’s over $600 a month, and with paying over $400 a month for health insurance and any medical bills the expensive health insurance doesn’t cost, along with investing your Roth IRA monthly contribution of $200, with the 401k investing and then stocks/bonds investment accounts, with living expenses, etc each month, what’s leftover, if anything? This is all just so frustrating to me. I feel like I’m being played living this game we call life
Yeah. You either make very few dollars or over 250k , but between the two you’re just a sucker
Meanwhile, some people get free cell phones, housing, food, money, travel expenses, medical services and more, just for crossing the border undocumented.
HSA’s are great! I started about 8 years ago and now have $80k after making some good investments. It’s like another 401k. I hope to retire in 3-4 years and use it to pay a lot of my retirement medical bills. My wife and I are healthy so I’m going to not spend any and let it grow! I have great company insurance and it will carry on until I’m 65 and go on Medicare.
Wow, amazing content. Definitely cleared out my understanding about HSA. From now on definitely going to take advantage of my HSA. Thank you
Jarrad makes a lot of good points, but I am not convinced that an HSA is that much of a no-brainer versus a Roth IRA. If HSAs have a "triple tax benefit", then Roth IRAs have a double-tax benefit - they grow tax-free, and distributions are tax-free. The difference then would be on the contribution side - Roth IRA contributions are not deductible. So if a couple maximized their HSA contribution and were in the 22% tax bracket, the HSA contribution would save them $1700 a year over a Roth IRA contribution. BUT, Roth IRAs have three benefits over an HSA - there's no requirement to have a HDHP (which itself can costs thousands per year in premiums), distributions are unrestricted (i.e. not limited to medical expenses), and fees are much lower or even zero in many cases vs. the fees associated with an HSA account.
Questions
1. You mentioned about not missing monthly contributions, is there a consequence to missing a contribution ?
2. Do you need to contribute the maximum or minimum amount to benefit it from the tax side?
I would be self contributing
1. I mentioned this because if you're contributing on your own (your employer is not doing it for you) then it's easy to forget to do this when you have the money. There is no consequence other than not maximizing the amount you can put in the account.
2. You benefit from the tax savings no matter how much you invest. The more you can do the better from an overall investment/tax savings perspective.
I like to think of HSAs as having QUAD tax savings, rather than TRIPLE tax savings. For the 70%+ of incomes below 147k per year, HSA contributions are also not taxed for FICA (social security), so isn't taxed the 7.65% that would go to that. I'll admit that these SS contributions theoretically reduce your payments from SS, but being young I'm not expecting much from SS anyway and the calculation is likely to change in the next 30+ years. Since I'm saving through my HSA, I'm confident that I'll have less of a need for it anyway.
The open season flyer I got mentioned HSA exactly one time and did nothing to explain it. What a disservice to the people. Meanwhile the use it or lose it FSA had an entire page dedicated to it.
Only one time?!? Wow. It's pretty sad people have to come to UA-cam or hear about it through word of mouth to find out about the benefits of an HSA.
Most people don’t really understand the world of insurance. There’s a lot of private practices out their that file everything out-of-Netwerk regardless and most are unaware. Some people would benefit a lot with a HSA and a high deductible health plan then a higher premium PPO plan.
In a lot of scenarios you’ll save yourself money with a cheaper premium plan paying more out of pocket than you would with a more expensive premium plan paying less out-of-pocket in a out-of-Network scenario. On top of tax benefits and a long term savings component.
Your second paragraph is 1000% true. Too many people assume "higher out of pocket/higher deductible" = bad, terrible, the worst! They look at that large number and irrationally assume the worst. Appreciate you calling this out 👍🏻
posted just in time for benefit enrollment!! right on the ball!!
Yes sir. Working in corporate america for many years made me realize the time of year I need to release this video for the highest impact and benefit to viewers 👍🏻
we decided to invest the HSA into corporate bonds that pay 10% per year for the 30 yr period... most young folks don't realize that when you turn 65 they will put you on medicare and they take the monthly premiums out of your SS check before you even see the money.... so your SS check is always less than you plan for... and medicare monthly is per person...not per family... so the health care monthly gets pretty high for two people... closer to $900/month to be exact... so if you plan on using your HSA to pay your monthly premiums you need to have enough investments for around $12,000 per year... so a 10% coupon from a corporate bond you will need to have $120,000 in your HSA account... I rounded it up a little because you can also use the HSA for sun glasses and standard glasses too... its for your eye health 🙂
What corporate bond pays 10% ?? I did not see any on fidelity
Just found out about HSA when I started my current job, our minimum is $2k to start investing. Another awesome benefit any medical expenses you pay yourself can be reimbursed-so you can wait to be refunded until you retire if you want.
This is a great run down of HSA's. Thanks for putting your content out there.
I've always wondered what the point of the HSA was. This was helpful.
Glad it helped 👍🏻
Just got my first hsa account with a new job and picked fidelity which I have multiple accounts already. lucky they happen to have the best hsa. Was planning to buy contacts and braces tax free but now u make me think if I should just leave it invested to utilitize the max contribution since I can save 2 percent with credit card anyways.
If you can afford those costs out of pocket then it's worth weighing all of your options.
I wish I knew about an HSA in the year 2000 when I started my job, I’d be RICH!! But when I did discover it in 2018 I’ve maxed it out ever since.
thats how I felt leaving my 401k without investing for 4 years until i looked it up starting a new job after college haha. your timeline is a bit more unfortunate.
😂 I know, right?
Wow this is great content and I am typically incredibly critical. Great work.
Great Video! What happens if divorced parents cover the kids separately? Parent 1 employers offers HMO only. Parent 2 employer offers HSA only.