Financial advisors will tell you that a health savings account is a great way to meet medical expenses, and that’s mostly true. If you qualify for an HSA, you want to make the most of it. But they’re not right for everyone. This is MoneyWise (Live), biblical wisdom for your financial decisions.<ul><li>There’s no doubt that HSAs can help greatly to save on medical expenses and reduce your tax liability. Money goes into the account tax-deferred, and you can use it tax-free for qualified medical expenses if you qualify. To be eligible for an HSA, you must have a high deductible health plan or HDHP. That means in 2022, your deductible for medical expenses, the point where your plan kicks in, must be at least $1,400 for an individual or $2,800 for a family.</li><li>If that’s you, you want to take full advantage. As I said, an HSA is a great way to accumulate tax-deferred savings for medical expenses and many financial advisers will tell you it’s ALSO a terrific way to save for retirement for some folks.</li><li>At age 65, the penalty for using the money for non-medical reasons goes away, while money used for medical bills is still tax deferred. So they’re a real win-win, but again, only for some people.</li><li>If you withdraw money from a retirement account after age 59 ½, you’re taxed on it, but you don’t pay a penalty. You can use the money for anything, but you do pay taxes on all of it, no matter what you use it for.</li><li>With an HSA, after age 65, if you use the money for non-medical expenses you’re still taxed. However, at that age, you’ll probably have more medical expenses than you would earlier in life. When you use HSA money to meet those medical needs, it’s tax free. So in that sense it’s better than a conventional retirement plan. It’s a double dip.</li><li>Who’s in that fortunate group? It's folks who don’t need to tap into their HSA funds all the time for short term health care. They're in a position to stockpile that cash for retirement, in addition to other qualified plans like a 401k. It’s such a good deal that some advisors will actually tell those individuals to pay medical bills out of pocket so they allow the money in their HSA to gain compound earnings for retirement. This group typically has low medical expenses and rarely reaches their health plan deductible. They’re usually young and have the opportunity to accumulate more money over a lifetime.</li><li>This group can maximize their HSA’s potential by investing the money in mutual funds or stocks and not spending it. HSAs are not like flexible spending accounts, so the money keeps rolling over from year to year with compound earnings.</li><li>You can contribute to an HSA up to $3650 for an individual and $7,300 for a family in 2022, plus an additional $1,000 for people 55 or over. That’s great for folks in that group. Young, healthy, and able to contribute the max to their HSA for years and years, but they’re in the minority. What about other folks?</li><li>Most people who qualify for an HSA fall into a large middle group, and they still want to take full advantage of this opportunity. They’re folks who have to tap into the account to meet their medical expenses. In fact, more than half of HSA owners exhaust their total balance every year.</li><li>But that’s okay, and it’s really what the HSA was designed for. They’re able to take advantage of the tax savings. The money they put in and use for medical expenses is tax free, so it’s still a good deal, even if the account never builds retirement savings.</li><li>That still leaves one group who might be eligible for a health savings account, that is, they have a high deductible health plan. But they’re still paying a lot out of pocket. For them, a health savings plan by itself won’t be much help. What they really need is to get on a plan with lower deductibles.</li><li>If that’s you, it might mean paying more in premiums, but you can shop around for a plan that won’t nickel and dime you to death after meeting the deductible.</li><li>No matter what your medical costs are, you can also think outside the box, and contact our friends at Christian Healthcare Ministries. They have medical sharing plans that could save you a bundle while meeting your healthcare needs. </li></ul>Next, Rob answers these questions at 800-525-7000 or via email at Questions@MoneyWiseLive.org:<ul><li>If you filed a tax extension for 2021, can you still contribute to an IRA for that year?</li><li>Does the interest from an I Bond entered in the same place on a 1040 as a interest from a trust?</li><li>If a company provided a legal service to you and you created a will with that service, is there anything else you need to do to make sure it's a good, legal will</li><li>If you were supposed to receive a reward that was meant to go against some of your college bills, you forgot to take receipt of it and now, you owe about $7,000, what should you do to get this bill paid?</li><li>If you'll be 56 this year and have not begun Social Security yet, should you begin drawing it and putting it into your IRA?</li><li>If you're ex-military and have transferred $40,000 of your 401(k) investments into gold and silver and you have about $25,000 in credit card debt, should you pull money from the 401(k) to pay off the debt?</li><li>If you're 60 and 62, both work full time, have no dependents and your house is paid, is there any reason to have life insurance?</li><li>If you're 78, in generally good health, you've had a Medicare Supplemental policy that you pay $280/month and you've heard that you can get Medicare Advantage which will be free and require a copay, should you pursue this?</li><li>What would happen to your dad's assets if he's passed away without a will?</li><li>If you have a 72 year old husband who's about to begin IRA distributions, how can you most appropriately divide his RMD to a charity and to yourself?</li><li>If you're a single mother and have a son with ASD, you're living with someone right now but you're thinking it's time to move out, should you feather your retirement contributions so you may afford an apartment?</li></ul>Be sure to check out the rest of MoneyWise.org to connect with a MoneyWise Coach or access our books and our many free helpful resources. You can also find us on Facebook (MoneyWise Media) and join the conversation. Thanks for your prayerful and financial support that helps keep MoneyWise on the air. And if you'd like to help, just click the Donate tab at the top of the page.

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Financial advisors will tell you that a health savings account is a great way to meet medical expenses and that’s mostly true. If you qualify for an HSA, you want to make the most of it. But they’re not right for everyone.

Get The Most From Your HSA

FaithFi | Aug 19, 2022

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