Health Savings Accounts (HSAs)

Health savings accounts also known as HSAs. They’re probably one of my more favorite investment accounts that are out there primarily for the tax benefits. But what are HSAs? Well they’re a tax efficient way for you to save for future health issues that might arise. The reason I say they’re my favorite is because it’s one of the only accounts that has that triple tax benefit. So you put money into them. You get that tax deduction. The funds grow then tax-free in the market or however you invest them. And then when you take the money out as long as you use the money for qualified medical expenses, you get a tax break from that as well. You get to take t them out tax-free. So it’s an awesome account. However, there are a bunch of rules associated with those HSAs. So you want to make sure that you understand them. One of them is not everybody can have an HSA, okay? So you have to make sure that your health plan is a high deductible health plan. So what does that mean? Well your annual minimal deductible for a self only individual has to be $1,500 or more, for a family that’s $3K or more annually. And then also you got to make sure that your annual max out-of-pocket isn’t too steep either. So the max for a self only covered person is $7,500 annually. And then for a family that’s $15K annually. So if your health plan falls into those limits, then and only then can you contribute to an HSA account. But you can’t just contribute as much money as you want to it. There are limits to that as well. And for a single covered person for 2023, that max contribution is $3,850 for 2023. And then for a family that’s $7,750 for 2023. So that’s the most that you can put into those health savings accounts on an annual basis. Now there’s one little catch to that as well which is pretty neat is if you are age 55 or older you get what’s called a “catch up ” contribution of $1K annually. So you can contribute a little bit more than another person if you’re getting closer to retirement and you’re past that magical age of 55. So that’s really neat. Now we’ve got the money in the HSA account. You’re doing that. But what about when it comes time to take money out of the account. That’s where you have to be careful, okay? Because you can only use these HSA funds for qualified medical expenses. So you want to make sure that you understand what is not and what is an actual qualified medical expense. So that’s why when you’re thinking about hey, do I have the ability to contribute to an HSA, can I even have one? And what does that look like when I take money out. Make sure that you’re speaking with somebody. Maybe it’s your Accountant or your Financial Advisor. Get with them so you understand all of the little intricacies with that HSA account. It’s a very valuable and powerful retirement planning tool and it’s something if you have available to you, I highly suggest you look into it.