Get The Most From Your HSA

08/19/22 • 25 min

If you qualify for an HSA, you want to make the most of it. But they’re not right for everyone. We’ll talk about where they do the most good and where they’ll have little impact on your budget today on MoneyWise. 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. That’s 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. If that’s you, you want to take full advantage of an HSA. Many financial advisers will tell you it’s also a terrific way to save for retirement - for some folks. That’s because 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. If you withdraw money from a retirement account after age 59 , 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. 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. Now, who’s in that fortunate group? These are 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. So 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. By the way, 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. So 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? Well, 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. 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. Now, 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. 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. Now, no matter what your medical costs are, you can also think outside the box, and contact our friends at Christian Healthcare Ministries. You’ll find them online at CHministries.org. They have medical sharing plans that could save you a bundle while meeting your healthcare needs. On today’s program, Rob also answers listener questions: ● How can you begin investing with an inheritance? ● Does it make sense to use retirement funds to pay off a mortgage early? ● Is it wise to do a cash-out refinance on a mortgage to pay off consumer debt? RESOURCES MENTIONED: ● Betterment ● Wealthfront ● Schwab Intelligent Portfolios Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29

Previous Episode

Debt Crisis Looming? With Jerry Bowyer

With a national debt now north of $30 trillion, is there a debt crisis on the horizon? And what does it mean for you? We’ll talk about that with Jerry Bowyer today. The consequences arising from the continual accumulation of public debts in other countries ought to admonish us to prevent their growth in our own. John Adams Jerry Bowyer is our resident economist here at MoneyWise. Jerry notes that he’s been hearing dire warnings about a looming economic crisis since the 1980s. But he says circumstances are shifting, and it’s time to take seriously the risk of a true debt crisis in the United States. Some will recall a growing national debt in the 1980s, but at the time, the United States had a debt-to-GDP (gross domestic product) ratio of 30-50%. But now, he notes that the debt-to-GDP ratio is roughly 130%. And that makes all the difference. Bowyer says Debt doesn’t matter at all right up until the moment when it’s the only thing that matters. And he adds that we’re closer to that moment than at any point in his lifetime. (Proverbs 22:7 says, The rich rules over the poor, and the borrower is slave of the lender. Bowyer explains how Proverbs 22:7 applies to governments, including that of the United States. He also details how the Federal Reserve’s monetary policies contributed to the problem. Rob West and Jerry Bowyer also explain how this impacts you and your family, and what you can do to help protect yourself financially. Bowyer is the author of The Maker Versus the Takers: What Jesus Really Said About Social Justice and Economics. And you can read Jerry’s weekly insights on the economy at Vident.com. On today’s program, Rob also answers listener questions: ● How do you determine the wisest way to use a large sum of money from a home sale? ● What is the best way to set up multiple savings accounts? RESOURCES MENTIONED: ● Ally Bank ● Capital One 360 Checking ● Marcus ● MoneyWise App Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29

Next Episode

Debt and Taxes - Foundation 5.

Today on MoneyWise, we’re talking about one of the five main ways we all interact with money: owing money and how to think about it from a biblical perspective. As we have discussed in the past, there are five basic ways that all of us interact with money: 1. Earn it 2. Live on it 3. Give it away 4. Owe it 5. Invest it Today, we’re focusing on owing. We can owe money back that we have borrowed such as a mortgage, car loan, or school loan. Credit cards could fall into this category too if you carry a balance from month to month. But even if you don’t have any loans or credit card debt, there is another way we owe: taxes. That would include income and property taxes, and any other type of tax where you have an amount you have to pay by a specific deadline. Let’s talk first about loans. Scripture is clear that if we borrow money, we must repay it and do so in a timely fashion. Psalm 37 has lots of counsel related to living a godly life. It contrasts the ways of the wicked with the ways of the righteous. One of the things it says in describing the wicked is that they borrow money and don’t pay it back. Now, I understand that sometimes extenuating circumstances perhaps related to bad health or a job loss or some other problem may prevent you from paying what you owe. But what the Scripture is describing here is someone who purposely doesn’t pay, not someone struggling to pay. Borrowing money involves making a promise to pay it back under the conditions outlined in the borrowing agreement. So repaying money is simply keeping a promise. And the Lord wants us to be people who keep promises. Now, some people have argued that Christians should never borrow and they typically point to Romans 13:8, which says, Owe no one anything, except to love each other, for the one who loves another has fulfilled the law. Well, I am certainly not opposed to not owing anything. But I think, in context, Paul is talking there about interpersonal relationships, not about financial management. That said, the clear counsel of Scripture is that debt can be dangerous, and it is wise to avoid it as much as possible. Proverbs 22:7 notes that the borrower is the slave of the lender. That’s rather striking language, and it describes something that anyone who owes money can affirm! The borrower is in a position of servitude to the lender until that debt is paid. Millions of people carrying school loans know this all too well. They struggle to get ahead because the lender is always there wanting that school loan payment month after month, year after year. Our counsel based on both Scripture and practical experience it’s best to avoid debt as much as possible. But if you do have debts, your moral obligation is to pay them on time. Now, let me talk briefly about owing taxes. This, too, is a moral obligation. Scripture is quite clear about this. In Romans, Paul refers to government officials as ministers of God who help maintain public order. And he says this is why we pay taxes. He writes, Pay your taxes and government fees to those who collect them. Of course, you and I know that government is often inefficient and full of waste! But that doesn’t absolve us of our responsibility, before God, to pay what we owe. To be sure, tax law can be confusing. And if you can’t understand it, as it applies to your situation, it may be wise to hire someone who can understand it so that you can be sure you’re meeting the requirements of the law, and doing so with complete honesty. Now, you can and should take advantage of tax provisions that allow you to reduce your tax liability. There is nothing wrong with taking a legitimate deduction, credit, or write-off. But never cheat on your taxes. That is not only illegal, it is also displeasing to God. So, in summary: keep your debt at a minimum, pay any debt you have in a timely fashion, and when it comes to taxes, pay them without rancor and with an honest heart. On today’s program, Rob also answers listener questions: ● How can you get ahead to purchase a car and house when there seems to be no financial monthly surplus? ● What should you do with investments if you’re fearful of the near future of the stock market? RESOURCES MENTIONED: ● Find a Certified Kingdom Advisor Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29