Become an HSA Millionaire
How to use the only true tax dodge in the law to set aside thousands on a tax-free basis
Subscribe to our Podcast!
Contact Steve here:
https://calendly.com/stevewershing/inquiry
Full Transcript below:
00;00;00;00 - 00;00;27;06
Unknown
Welcome back to 30 Minute Money, the podcast that delivers action oriented smart money ideas and bite sized pieces. I'm Scott Fitzgerald at ROC Vox Recording and Production. I have Steve Wershing in studio from Focused Wealth Advisors to throw down the, the information here. Throwing it down. Throwing it down. Good to see you again, sir. Nice to see you as well.
00;00;27;09 - 00;00;45;06
Unknown
And we're going to talk about, oh, become an HSA millionaire. I don't remember what an HSA is, but I like the word millionaire. No, I really wants to be an HSA millionaire. Yes, that's the new game show, that is. No, I do remember what an HSA is. I'm just joking. Yeah, some of the things you've told me has sunk.
00;00;45;08 - 00;01;15;03
Unknown
Sink in. I'm seeping into your brain. Well, we went and we want to talk about this because, you know, it's a it's a real opportunity and one of the, one of the biggest expenses that people will have in retirement is medical, medical expenses, health care expenses. The center for Retirement Research has, has, is that found in a survey that the median retiree spent, $44,311 on medical costs in 2018.
00;01;15;06 - 00;01;38;18
Unknown
And fidelity estimates that an average couple at 65 will need $315,000 to pay for health care through retirement. Other places have come up with much higher numbers. Health healthy services did a survey and estimated at it at about twice that. But the point is, one of the things that you'll need to put money away for, for retirement is health care.
00;01;38;20 - 00;01;56;03
Unknown
Probably even more than you use during your working life. And so a great way to do that is to do it in a way that's not going to cause you additional taxation. And that's where the health savings account comes in. And so we want to talk a little bit about just this intriguing idea of becoming an HSA millionaire.
00;01;56;07 - 00;02;12;25
Unknown
And you know, I've been kind of leaking this information to my wife. You never because she has an HSA account. And I keep telling her, I'm like, you know, Steve keeps talking about this, how to how to do these cool things with the HSA. I think you should, I think we should go and talk to him about it.
00;02;12;25 - 00;02;38;07
Unknown
And she goes, what? Yeah. So this is it. So here it is just for this episode. And she'll find all I find all 11. So a health savings account is a tax preferred account that you can have if you have a high deductible health care plan. So if you have the kind of health insurance where the deductible is really big, then you can get, a health savings account and the health savings account.
00;02;38;13 - 00;03;00;27
Unknown
We love these instruments because they're what they may be. The only real true tax dodge in the entire tax code of thousands and thousands of pages in it. There's at least one. And I would be hard pressed to think of another true tax dodge, which means you get to put the money in there before it's taxed and it comes out without being taxed.
00;03;01;00 - 00;03;16;17
Unknown
Normally either you get a deduction upfront and then you pay the tax when you take it out, or you pay the tax first, and then you can take it out tax free. But the HSA goes in without being taxed. And and if you pull it out for the right reason, you will not be taxed when it comes out.
00;03;16;17 - 00;03;41;28
Unknown
So what that means is you could save as much as 30% on on paying your health care bills in retirement because you're not having to pay tax on that either by using after tax dollars or by pulling it out of retirement account to pay. Oh, I know, that's incredible. So, if you have a high deductible health care plan and you have an HSA, you can use it almost like another IRA.
00;03;41;28 - 00;04;04;29
Unknown
It's just an IRA for a specialized purpose. It's an IRA that you would use strictly to pay, medical costs with, and like those other kinds of retirement plans, there are annual limits you can put depending on your marital situation and your age. You can put anywhere from $4,100 in it, all the way up to $9,300. Depends on if you're single or married.
00;04;05;01 - 00;04;24;26
Unknown
It depends on what age you are, but somewhere in that range you can put it, put it, put that money away. And at first it just accumulates kind of in a cash account so that you can pay out those money for, for medical expenses. But, but, but many plans, most plans probably once you get above a certain level then you can invest that money.
00;04;24;28 - 00;04;43;04
Unknown
And so you can let it grow. So if you put enough money in there, then you can start investing it just like any other kind of a retirement or investment account. And you can get the benefits of that money compounding over time until you need it in retirement. And that depends on the type of of HSA that you have.
00;04;43;04 - 00;04;59;21
Unknown
What the what the level is that you're looking to reach. Yeah, right. It's a what they'll, they'll let you they'll the different plans allow you to invest once once you get to different levels. It's a, you know, that's up to the plan. And do all the plans allow you to invest? Are there only certain ones or is it.
00;04;59;21 - 00;05;14;22
Unknown
Most of them do. But I have seen some, that all they do is they just accumulate it in a, in a, in an interest bearing account. So you really want one of those kinds of plans that will let you invest so that it can really if you let it leave it in there long enough, it can really grow for you.
00;05;14;22 - 00;05;32;27
Unknown
And is there a term that's used for that, or is that something deep in the in the depths of the HSA plan that you have to look up or something like, is that easy for the average person to find? It should be. Yeah, it should be easy. I mean, if you're looking at the at the, you know, the opportunities and the little handbook for it, it should it should say whether or not you can invest.
00;05;32;28 - 00;05;55;08
Unknown
Okay. Yeah. So the idea would be to take a little bit of money, each month or each year and put it away as a separate kind of reserve account for paying medical bills later on when you get into retirement and you don't have to wait until retirement, if you put money in an HSA and you have a medical expense, you can you can pull the money out to pay.
00;05;55;08 - 00;06;14;11
Unknown
Now. But from my perspective, you know, most people through most of their working lives have, you know, pretty modest kinds of health care expenses they have to pay out of pocket. And so and the medical bills that you get in retirement are likely to be higher. It's just typically that's how it works is when you get into retirement, your medical bills typically go up.
00;06;14;13 - 00;06;37;09
Unknown
So so what I do and what I recommend people do is that you fund your HSA to the maximum as much as you possibly can, and then you pay your medical bills out of your pocket and just leave the HSA money in the HSA so it can continue growing tax deferred until you may need more of it later on.
00;06;37;12 - 00;06;56;18
Unknown
Now, if you really want to become a millionaire from doing this, it takes a while. And so for many of our listeners, there just may not be practical form. For example, if you contributed the maximum every year and you could invest that at 6%, it would take you 36 years to, you know, to get $1 million balance in there.
00;06;56;20 - 00;07;18;24
Unknown
Right. But I really thought it was kind of an intriguing idea. And, you know, it may may help you think about HSAs in a little different way, even if you don't fully, really quite have 36 years to let it work. Yeah. And it's just one of those things that every little bit counts, every little, you know, extra step that you can take to help yourself in retirement is worth a look at.
00;07;18;24 - 00;07;40;19
Unknown
That's exactly right. What would you like to add? A little financial update every week? Just a little tidbit of financial news, a few articles that I found interesting and wanted to pass along to my followers. And a couple of thoughts from me about what's happening in the markets about a financial planning topic, and a little bit about what's going on in my life.
00;07;40;22 - 00;08;01;21
Unknown
Then sign up for our free newsletter at Focused Wealth advisors.com/publications. Every Friday you'll get a little newsletter with some links to some financial articles. There is never a gateway you'll be able to read every article that I send out. You don't have to subscribe to those publications, and they'll be curated so that you get articles that are interesting to you.
00;08;01;22 - 00;08;21;04
Unknown
Focused wealth advisors.com/publications. All right. So what's your 30 minute action item. That 30 minute action item is check how much you are putting into your HSA. All right. There you have it 30 minute money. It's three zero minute dot money. You can find this on all the platforms. And make sure you like and subscribe and share and tell your friends.
00;08;21;07 - 00;08;48;15
Unknown
You can find, Steve at Focused Wealth advisors.com, and I'm at RocVox.com. We'll catch you next time on the next episode of 30 Minute Money.