The Hero of Taxes, Investing - and saving your butt on Medical bills.
 

 

Let's talk about the Tripple-Tax Advantaged Health Savings Account.

 

 

Whether you have medical insurance through a work plan, The Affordable Care Act, or are fending for yourself in the jungle of private insurance.

YOU MUST CONSIDER AN HSA!

ELIGIBILITY:
An insurance plan that is characterized as either “HSA eligible” or referred to as a "High Deductible Health Plan" (HDHP)

HOW TO OPEN:
I recommend Fidelity as a great option to host your HSA.

WHAT's THE SPIEL:

1) Establishing a medical savings account.

2) Getting tax deductions for your yearly contributions (up to $4,300 individual / $8,550 family/couple)

3) Having your contributions grow tax-free. (we will get back to that)

4) Pay no tax/penalty when you withdraw to pay medical expenses. (despite getting tax deductions upfront!)

TRICK:
I call it the split HSA – something I teach to my clients, and why I recommend hosting the HSA at a brokerage vs a bank.

You keep an amount equivalent to your Health Plans “Max Out of Pocket” in a Money Market Fund – Safe while earning decent returns on your cash.
(Fidelity will even give you a debit card to use)

This becomes your medical emergency account.
Now you are fully funded up until your plan takes over.

Any amount above your "Max out of pocket" goes into long-term investments like a stock index fund.

At age 65, you can begin withdrawing from your HSA account for non-medical expenses – in other words, it will resemble a regular IRA or 401K.

Meanwhile, you have enjoyed the triple tax advantage of:

1) tax-free deductions as you contribute.

2) tax-free growth as you invest.

3) Tax-free withdrawal for medical purposes.

Ironically, HSA contributions lower your adjusted income and may even help you get more tax credits toward the Affordable Care Act (or other income-dependent credits).