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CTSSHAH
@ctsshah
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#SaturdaySchool #HealthSavingsAccounts So my previous two Saturday posts were the #RothIRA and #Employer401k and I want to stick w/ the idea of posts centered on retirement savings accounts on Saturdays. For this weekend, I wanted to touch upon a retirement savings accounts that you might have available that is not subject to an income limit. At some point, I do want to speak on a #TraditionalIRA or #BackdoorRothIRA so that I do not alienate anyone over the Roth IRA income limits on here. So I would first recommend watching the video as it is tough for me to keep my posts to a reasonable size on your phone ... below is the high points w/ examples. #HSA : - An Health Savings Account (HSA) is accessible only if you have a High Deductible and High Premium account and the money used to fund is Pre-Tax money and can be invested and unused funds carry over each year - This is different from a Flexible Spending Account as the unused balance in an FSA disappears at end of each year and different limits and restrictions on what counts - see link below - HSA can grow tax free and then can be used to reimburse any qualified medical expenses tax free - HDHP plans are not a good idea for everyone and you need to think carefully about your situation and your family's situation before signing up for a HDHP just get access to an HSA Example 1: Young and Healthy The usual demographics where HDHP can work is a young and healthy individual who does not regularly see a doctor or take medications. This is the perfect plan for me as my personal HDHP plan has a deductible of $3500 and then it takes over and covers 100% after, so I am protected against something catastrophic and can pay cash or withdraw from my HSA if need be for any unexpected medical costs. To date I have maxed it out every year and never withdrawn from it and it has grow nicely and I hope to leave it uninterrupted until I'm in my golden years. I did have chest palpiations one year and had to do a cardiology work-up and so I paid all my expenses with cash outside of my HSA. I did, however, save all my medical receipts so that 30 years from now I can just start drawing down from my HSA after allowing for compounding and take that money out tax free. Example 2: Chronic Medical Problems The other demographic where this plan can make sense is someone with chronic medical problems or known large medical bills. So lets say I have an employee that knows that their chronic medical bills are well in excess of our $3500 deductible. If this is the case, then having a HDHP is actually cost savings right away due to our specific plan covering 100% after the deductible is met (please make sure you check what your HDHP plan is as yours might have a % that you are still on the hook for). For this individual the HDHP saves them movey and then on top of that the HSA also could potentially be used to directyl reimburse themselves the full amount to pay down their deductible that year. For 2021 the individual maximum is $3600 which means that if this is funded w/ Pre-Tax money and then reimbursed to you tax free you get to save the difference on whatever your income tax on that money would have been. Ideally you would rather just hold off on drawing from your HSA, but this was a different way of showing the benefits. Example 3: Family If you are married or have kids ... then getting a HDHP for the family might be a good or bad idea - this one is definitely more situational. This could be a bad idea because the deductible will be proportionally higher. Meaning that it might still be good against something catastrophic but you have to seriously weigh the pros and cons of what the deductible is and what the coverage is like after meeting the deductible. The HSA contribution limit for a family is $7,200 for 2021, so compare this against the deductible for the plan. My wife has her insurance through her work which has excellent coverage at a reasonable premium and so her and I have separate insurance plans. The plan is for when we finally do have kids that they will be listed under hers. Videos / Resources: - HSA: https://www.youtube.com/watch?v=LSEypb1OxJ8&list=PLn0fZqMvSiYDnwoBJFOx8_e32aMv8iYqn&index=7 - HSA vs FSA: https://www.valuepenguin.com/banking/difference-between-fsa-and-hsa P.S.: Hope this helps and is as clear as mud 😜. Feel free to comment w/ questions and I will do my best to get back as soon as I can this weekend. Gonna be hanging out w/ my parents eating good food and enjoying a cocktail. #TaxEfficiency #RetirementSavings #HealthyHabits
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