HSA Hacks for Couples: A Game-Changer in Retirement Planning

[00:00:00] One of the jewels in the crown for setting yourself up for success in retirement.

[00:00:06] Yeah, exactly. And 20 years later you get half a million dollars for very little work.

[00:00:10] Which doesn't suck.

[00:00:11] No, no, take that. Take it to the bank. Exactly.

[00:00:26] Welcome to CoastFI Couple, a podcast where love meets financial independence. I'm Matt.

[00:00:30] And I'm Yana. Join us every other week as we dive into the world of CoastFI and share smart money tips for couples.

[00:00:35] We're going to be talking all about how to strengthen your bond and your relationship and bringing closer to financial independence.

[00:00:40] One episode at a time. We are back with another episode of CoastFI Couple,

[00:00:47] and today we're going to be talking about HSA accounts. I know you are so excited about this episode.

[00:00:53] I'm thrilled about this episode. Yeah. So this is the best account for early retirees

[00:00:59] or anyone looking to try and supercharge their retirement accounts. And so we're going to break it down.

[00:01:05] Yeah. All right. So let's go ahead and start off with the eligibility requirements of an

[00:01:12] HSA. Or I guess we should talk about what is an HSA. Okay.

[00:01:17] What does HSA stand for?

[00:01:21] HSA is just simply a health savings account. And that is different than a flexible saving account,

[00:01:29] or excuse me, a flexible spending account. The FSA is not the same as the HSA. And the difference there

[00:01:35] is savings account. And so the HSA, which is the one that you want is the essentially savings account

[00:01:44] that you can use in many different ways to get you closer to a healthy, robust retirement while being

[00:01:53] able to take advantage of this triple tax advantage plan that we'll talk more about.

[00:01:57] Well, I think what's really interesting about the HSA is I think a lot of people know what an HSA is because

[00:02:03] it's offered by their employer, or maybe they've heard of an HSA and they just think of it as

[00:02:10] a health benefit. It's just a benefit, a certain type of benefit provided for from their employer.

[00:02:16] But it's so much more than that. It's not just a way to save specifically for your medical expenses.

[00:02:22] I mean, yes, it is, but it is so much more than that because it's triple tax advantage,

[00:02:27] which we're going to get into a little bit more in this episode.

[00:02:29] I think we mentioned this in a couple other episodes. A lot of times employers will have,

[00:02:34] you know, the, the, the, um, the people who like own and operate your HSA, like fidelity or health

[00:02:41] equity will come in and do a little presentation about how valuable this is as a tool, as a benefit

[00:02:47] to be paid for healthcare expenses. But if you're hacking the system, like we're teaching everyone to

[00:02:54] do, um, this is the best retirement vehicle option because the government allows you to

[00:03:03] essentially save tax-free. It can grow tax-free, grow tax-free, and then you can take it out.

[00:03:10] Exactly. Tax-free. Yeah. So it's a triple tax advantage plan.

[00:03:13] But I wonder how many times you can say triple tax advantage.

[00:03:16] I'm going to keep track as we, okay. You know, when I was working for that staffing agency,

[00:03:20] not, I think I was working at that staffing agency when we got engaged, there was a form that they did

[00:03:26] where they sat us all down and they went over all of the different benefits that they were offering.

[00:03:31] And they were going on and on about the HSA. And I remember at the time it was just like,

[00:03:35] it just went right over my head.

[00:03:37] More acronyms.

[00:03:37] Because I was just like, well, okay, I don't know what that is. So I'm just going to choose

[00:03:40] whichever one is the cheapest, but actually the HSA plans are usually, um, more economical on the

[00:03:48] premiums because it's a high deductible plan. Yeah. Right. Yeah. So typically,

[00:03:53] so one of the requirements, I guess you should break down the requirements.

[00:03:56] Let's do that. Let's go back to the top of the episode notes, eligibility requirements.

[00:04:00] Okay. All right. So, so first off in order to qualify for an HSA, you have to have a high deductible

[00:04:08] healthcare plan or an HSA qualified plan. And there's some nuance there, but if your employers offer an HSA,

[00:04:16] uh, there usually is an option to do a high deductible healthcare plan. And to your point,

[00:04:23] that gives you a kind of more cost effective monthly payment to qualify for the plan. But then you're

[00:04:31] having to pay higher out of pocket, uh, for actual healthcare expenses. Right. And so it's kind of like

[00:04:38] a, um, worst case scenario or, you know, pull the rip cord. You're going to hit that limit.

[00:04:44] Sometimes it's upwards of, you know, $7,000 a year and individual charges that you might take. And so

[00:04:53] the kicker here is if you're able to cashflow that. So we recommend you not start an HSA until

[00:05:01] you have a healthy, robust emergency fund, because you want to be able to pay for those expenses out

[00:05:08] of pocket. Right. To be able to keep it in the market as long as you can. And we'll break this down.

[00:05:12] I think I'm going too far ahead of myself. It's okay. It's okay. I also wanted to note the,

[00:05:17] the high deductible plans versus the low deductible plans. The high deductible plans have a lower

[00:05:24] premium because when you do have to pay out of pocket, there's more that you will have to pay

[00:05:28] out of pocket. And so oftentimes you'll hear people suggest that if you are relatively young

[00:05:34] and healthy, it's a little bit of a safer bet to do a high deductible plan because you're less likely

[00:05:39] to need to go to the doctor or a bunch in the span of a year versus if you are in your fifties or sixties

[00:05:45] or you have complicated health needs, a high deductible plan might be, might not necessarily

[00:05:50] be your best option. It's a great point. Yeah, it's a great point. So, so yeah, let's just reiterate

[00:05:55] that. I guess the, the way that this plan really works is if you are healthy, you don't have a lot of

[00:06:03] healthcare expenses. You don't foresee a whole lot of, um, strenuous healthcare expenses.

[00:06:08] Yeah. So if you're just starting out your career or, you know, you, you haven't had to go to the

[00:06:11] doctor quite frequently and you know, like today, luckily we don't. And so the premiums we pay are

[00:06:19] just kind of like catastrophic insurance. Like if something goes wrong, if one of us gets cancer,

[00:06:23] we're covered. We have the parachute there, but most of the time throughout the year, we're not paying

[00:06:29] a lot of healthcare expenses. And so we can take advantage of this plan a lot easier.

[00:06:34] Right. Yeah. And it's also really a good idea to be strategic in the way that you line up some of

[00:06:40] your healthcare needs. So for example, earlier this year, I had a couple of back-to-back procedures

[00:06:45] that I had to do. One of them I could have put off, but I thought, you know, I'm just going to go

[00:06:49] ahead and get everything done this year instead of putting off another six months or a year, because

[00:06:53] I knew that that meant that I could hit our deductible. And then anything after that point is just

[00:06:59] basically going to be free. So it's good to be strategic about the way that you utilize your

[00:07:05] healthcare as well. Yeah. I think most people are familiar with that part of it, right? Like

[00:07:09] you hit your deductible, that's a good and a bad thing. It's like, Hey, you paid a lot to get there,

[00:07:14] but at least now you can, you know, the door's open. You finally can have all your expenses

[00:07:17] kind of covered. You can do the things you didn't necessarily want to do because now you have the

[00:07:22] ability to get them kind of paid off for free. Right. So, all right, cool. So let's go back real

[00:07:26] quickly because I think that this is important. Okay. The, the HSA first off must have a high

[00:07:32] deductible healthcare plan. Yes. It, um, you must not be claimed as someone else's dependent,

[00:07:38] right? So on tax returns. So you are an independent or part of a family, you can contribute to an HSA

[00:07:45] as long as you're not someone else's dependent. And then this isn't necessarily an eligibility

[00:07:49] requirement, but Matt noted earlier that you want to make sure that you have a really robust

[00:07:55] emergency fund to cover medical expenses. So in this strategy of using your HSA as a savings account,

[00:08:02] not just for medical expenses, but just a way to save and get that compounding growth with that

[00:08:07] triple tax advantaged, um, account is, is to pay out of pocket for all of your medical expenses. And

[00:08:14] the best way to do that is to have a robust emergency fund. So it's not necessarily a requirement,

[00:08:20] but it's strategy. It's something we definitely recommend. Yes. Right. So, okay. So you're

[00:08:25] relatively healthy. You're, you're, you've got your catastrophic insurance coverage through this

[00:08:30] plan. So if something goes wrong, you have to go to the operating room or something like your

[00:08:34] insurance will still cover that, but you're paying out of pocket for all the little things. And so this

[00:08:40] is part of the strategy, right? If you can absorb some of those menial costs, like anything outside

[00:08:47] of co-pays or, you know, you want to go get a dental dental cleaning or vision check or something,

[00:08:53] or even prescriptions prescriptions. Yeah. So the kicker here is you, you are paying out of pocket

[00:08:58] for those instead of using the HSA savings account for those expenses. Yeah. And we'll explain why.

[00:09:05] Right. So I think let's get into the specifics of what is the HSA include, maybe some of the

[00:09:11] benefits there, the benefits or like the contribution limits. Oh, that's a great point. Yeah. Let's do

[00:09:17] contribution. Okay. So for 2024, the contribution limits for an individual was $4,150 and the family

[00:09:25] contribution limit was $8,300. Um, in 2025, the contribution limits for an individual are going

[00:09:33] to go up to 4,300 for a family. It's going to go up to 8,550. And I see your note on here that for age

[00:09:42] 55 plus, you can do an additional $1,000 catch-up contribution. Is that new? They didn't know that's

[00:09:47] the same. They've done that for a while. Yeah. Okay. Okay. Yeah. All right. Interesting. Now it's also

[00:09:52] important to note that if you and your spouse are both on separate healthcare plans through your

[00:09:59] employer and you both have access to an HSA, you can't both contribute the 8,300 or 8,550,

[00:10:08] which is something we actually learned the hard way because we were contributing to yours to the max,

[00:10:14] but then my employer actually does a match. So we had over contributed, which you can actually get a

[00:10:19] little bit of a hit on your taxes when you do your tax return. So we had to go through the rigmarole of,

[00:10:24] of fixing that and taking it out and earmarking it appropriately on our taxes. So just be cognizant

[00:10:29] of if you are married filing jointly and you are doing the family contribution limit to the limit,

[00:10:37] to the max that either employer maybe doesn't just want to check your matches for your employers and

[00:10:43] check what you're contributing because it counts for across both of those accounts.

[00:10:47] Correct. Yeah. So since we're married filing jointly, we are all under one healthcare plan.

[00:10:53] I'm under currently your plan. Well now, but before you were on your own and I was on one,

[00:10:57] remember? And so we were contributing the max to yours, not realizing that my employer did a match.

[00:11:02] And so we had over contributed to accidentally because. Yeah. And in your instance, it wasn't that

[00:11:07] they provided a match. It was that you went and got a health screening and they gave you like 250 bucks.

[00:11:13] I can't remember what it was. That's what it was. It was 250 bucks into your HSA,

[00:11:17] which you were not contributing to. So then we had to, yeah, like refile our tax paperwork to get

[00:11:24] last minute, like three days before the deadline.

[00:11:27] Yeah. For April 15th. So we had to pull that money out actually. And which 250 bucks,

[00:11:33] not that much, but you took the hit on that because we had to.

[00:11:36] That was a fun little administrative panic attack.

[00:11:39] Well, it's not, it's a good, it's a good problem to have. Right. So the benefit of having two people

[00:11:46] on this plan to potential employers is let's say, for example, you know, one spouse is going to get

[00:11:53] $250 towards the HSA limit because they're doing health screening. Well, that just means it's $250

[00:12:00] that we do not have to contribute ourselves collectively to meet that $8,550 limit now.

[00:12:07] Right. And so we can, you know, take advantage of that match that they give you.

[00:12:11] Yep. Yeah. All right. Cool.

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[00:14:18] program, it'll work for you. Enjoy. So what are some key features? All right. So I think the easiest

[00:14:25] thing is that the HSA is very similar to like a normal bank account. When you open one up, it will

[00:14:32] have a kind of cash account and a brokerage or investing account. Right. And so a lot of these HSAs

[00:14:40] require you to have a minimum cash balance. Usually it's like around a thousand bucks or something

[00:14:47] before you're able to contribute to an investing account within the HSA. Before you're able to

[00:14:52] able to move any funds to an investing account within it. Okay. Exactly. So, you know, as you're,

[00:14:59] as you're contributing to these, ideally you want to do it through your payroll and we'll talk about

[00:15:03] why, but let's say I work for a company. The company allows me to contribute X dollars a month

[00:15:09] spread out over the whole year for us to add these. You kind of set it and forget it. Once you hit that

[00:15:15] minimum cash balance of typically a thousand dollars, then anything in excess of a thousand

[00:15:20] dollars, you can then put directly into a investment vehicle, like a index fund, which we

[00:15:29] recommend, like you've heard on the show before, we want you to put any investment dollars you have,

[00:15:34] at least initially into a index fund with low expense ratios that span the entirety of the S&P 500.

[00:15:42] And that's all businesses. Right. Yeah. So, um, I know that we've mentioned this before

[00:15:48] on a previous episode, how it's not just enough to put the money in a savings account. You actually

[00:15:53] have to make sure you are investing those savings. There's plenty of people who are doing the right

[00:15:57] thing by putting money away in a 401k or putting money away in an HSA, but they're not going back

[00:16:02] and then making sure that those funds are invested appropriately. Correct. So, which I was not,

[00:16:06] when they just say first came out, I was not aware of this, you know, triple tax advantage hack.

[00:16:10] And we were just putting money into it, you know, because we were trying to take advantage of the

[00:16:15] tax savings as you contribute contributions. And we were spending out of it initially, uh, for

[00:16:21] doctor's visits and dental visits and things. And so we've learned not to touch it now. Yeah.

[00:16:27] All right. I see some notes on here that say, uh, no FICA tax, social security or Medicaid.

[00:16:35] Yes, exactly. So by contributing through payroll, you avoid the Medicare and social security tax on

[00:16:44] that amount, on that contribution. And so you are able to open up an HSA, uh, yourself. Um,

[00:16:50] but you have to prove that you have a high deductible healthcare plan. Oftentimes employers now will

[00:16:55] provide one themselves. Um, but you're able to pick a, any company you want to, want to work with.

[00:17:02] So for example, we had health equity when we used, we first opened it up through our business,

[00:17:06] health equity sometimes charges a higher fee. So we actually were able to take that money out and

[00:17:11] contribute it kind of a like to like to say fidelity who has typically lower expenses for the

[00:17:17] HSAs, but it's a little bit more of a like work having to do that because every contribution will go

[00:17:22] into health equity and then you have to transfer it out to fidelity. So just to stay on top of it,

[00:17:27] if you want to take full advantage of it. Right. Okay. I think that's a piece that you do.

[00:17:31] I do that part. It's a little bit of, um, you know, paperwork trying to get it done. I can do

[00:17:36] it once a year at the end of the year, if I wanted to, or I can just leave it, take the small fee if I

[00:17:42] wanted to, and then do it later on. Like right now I still got some from my last job that I need to

[00:17:46] move over to fidelity. So we were on Matt's healthcare plan through his old employer for a long time.

[00:17:50] And then I had my own healthcare plan through my most recent employer. And so we were on two

[00:17:56] separate for a long time. And then you had your own HSA and I had my own HSA, which was the first

[00:18:00] time we each had one. And because I had the match in mine, there were some funds, but now

[00:18:07] it's just my HSA. And so we're contributing to my HSA for the first time I had to go in and actually,

[00:18:14] um, invest those funds. I had no idea what I was doing. And so I was like fretting over how to do

[00:18:20] it. Do you remember I had pulled up my laptop and your laptop, I was afraid to press a button

[00:18:23] because I was afraid to do it wrong. Well, luckily it's really easy to adjust, right? Like you don't

[00:18:28] have to wait to a certain time of the year to, to move funds around. Uh, but yeah, it does take a

[00:18:33] little bit of reading to get the gist of it. And I've done it now so many times that it's not hard

[00:18:37] to know what is a good deal and what is not. It's figureoutable. Yeah, it's figureoutable. I think

[00:18:42] one thing that we've figured out along the way is that sometimes employers will increase the cost to

[00:18:51] add a spouse to a healthcare plan. And so we figured out that by you having your own

[00:18:57] healthcare plan and me having mine with the kids, right? You were able to take advantage and get

[00:19:03] that $250, $250 match towards the HSA. Plus we weren't getting the, the penalty of me being on your

[00:19:11] healthcare. Exactly. And my company also, I think paid like, I don't know, a hundred bucks or something.

[00:19:15] So, you know, it's, it's a little bit of extra cash in our pockets. It's free money. Why not just

[00:19:20] simply, you know, play the game a little bit and take advantage of the money. So these are small

[00:19:25] details that you can kind of, you know, scour over a little bit, which we do, which we do. And it might,

[00:19:31] you know, $250 or $350 might seem like small bones, but those are the things that really do add up over

[00:19:36] time. So, I mean, I look at it in inverse. If I was getting charged, you know, 250, 300 bucks for

[00:19:42] something that I didn't need to be, well, I'm going to fix that. And so that's just one option

[00:19:47] that you can do as you're trying to iterate and improve over time.

[00:19:51] And then the other thing I really want to make sure that we highlight about the HSA again,

[00:19:56] because it's triple tax advantage. I think we're on the seventh or eighth time I've said that this

[00:20:00] episode. You, when you contribute to the HSA, you contribute with pre-tax dollars.

[00:20:10] Yes. And so before you even get your income, it's taken out.

[00:20:15] If you, if you contribute through your employer. Right. Yes. Um, and what's really great about that

[00:20:21] is it actually brings your AGI down, which is your adjusted gross income. And even though it's,

[00:20:28] you know, depending on if you're contributing as an individual or a family, you know, for a family,

[00:20:34] it's around $8,000. That might not seem like a whole heck of a lot, but it can really bring your

[00:20:38] tax bracket down. If you are on the threshold of a particular tax bracket, making that contribution

[00:20:44] can bring your tax bracket from 22% to 12% or something like that, which can save you some

[00:20:50] money on how many, how much you're paying in taxes the next year. So yeah. And I think in a future

[00:20:56] episode, we're going to talk about tax strategies. I would love to. I know that you're kind of a nerd

[00:21:01] about that. Yes. I definitely went down the rabbit hole on AGI and tax optimization and,

[00:21:08] and what accounts we're saving and how much and how to really make sure we're in a particular tax

[00:21:13] bracket, which was really fun for me. I think it's, it's great. Cause once you have the basics in place,

[00:21:19] right? Like you're maxing out your 401k, your Roth IRA, your HSA, and you're sitting and forgetting it,

[00:21:26] then, then the tax optimization, you have more brain space to start being a little bit more

[00:21:32] strategic and creative on the way that you're saving and all the other little puzzle pieces

[00:21:37] kind of start to fall into place. But yeah, exactly. All right. Back to triple tax advantage

[00:21:41] HSAs accounts. Um, all right. Pro tips for optimization, max out your HSA each year through

[00:21:52] payroll if possible. Yes. Cashflow yearly medical expenses and pay out of pocket and scan your receipts.

[00:22:00] So this is the part that I think is important because you could, there's two roads you can take.

[00:22:07] If you're maxing out your HSA every year, congratulations. You're doing everything you

[00:22:11] possibly can to take advantage of the best account out there for retirement. But if you want to take it

[00:22:17] one step further and make that money be, um, again, growing tax-free and you can withdraw it tax-free

[00:22:26] for anything, then there's one extra strategy you do, which is capture your receipts. And I've met a

[00:22:33] lot of people in the fire community that do this in different ways. Uh, a lot of, uh, people who've

[00:22:39] been around for a while will actually just keep the physical receipts in a file.

[00:22:43] What? I know. Uh, I don't recommend that. I think that with today's day and age, you have a camera in

[00:22:49] your pocket. You might as well just take a snapshot of the receipt, what we do. And I'm giddy about

[00:22:54] this. We, what we do, what Matt does. What I have done and you, you do now too. I lovingly support.

[00:23:00] Yes. Uh, it's not as hard as it sounds, but what you do is you take a picture of the receipt

[00:23:04] and then I have a simple Google file, uh, like Excel file that I just note the date of service or the

[00:23:11] date of when we had our healthcare expense, the provider and the cost of what we paid at the time.

[00:23:17] Cause again, we're pulling money out of our pockets to pay for it. And I say that that money is tied to

[00:23:23] this receipt. And I have a year of when that receipt is done. So I'm kind of a nerd. So I love

[00:23:27] it. 2024, for example, everything that we've spent that is healthcare related goes into, into that file.

[00:23:33] And then I have an Excel file that monitors the amount that we put in there. And the reason that

[00:23:38] I do that is that if I can quantify that we paid for this healthcare cost in this year to the IRS,

[00:23:49] then that means at any moment I can withdraw that amount of money from our HSA account.

[00:23:54] And so over time, if you think about all of the things that qualify as healthcare related expenses,

[00:24:01] I mean, it's any, it's band-aids, it's, it's tampons, it's anything. Um, and descriptions,

[00:24:10] Tylenol. Exactly. Exactly. Q-tips to Q-tips count as well. Um, if band-aids count,

[00:24:16] I got to imagine Q-tips product count, but there's, you know, the CDC has their little, um,

[00:24:20] do they have a list? They have a list of specific products. They do. They do. And any,

[00:24:23] any like flu shots, anything like that, that you have to pay for. Um, I pay out of pocket and I keep

[00:24:29] the receipts that way, again, in the future, we can pull out that money. And so that those little

[00:24:33] amounts add up over time. And we're talking, you know, 10 or 20 years of contributing to these

[00:24:40] accounts and all of the healthcare for a family that is, is being paid out of pocket. That means

[00:24:47] that we can pull out thousands of dollars, thousands, tens of thousands. Well, back up a little bit.

[00:24:52] It's not just that we are now saving money into the HSA. And instead of spending money out of that

[00:24:59] HSA to pay for our medical expenses, we're paying for that out of pocket. And we're doing that

[00:25:02] strategically. So that way the money that is in the HSA can grow tax free. Yes. And so that way,

[00:25:08] when we want, whenever we want, but preferably later in life, we can tap into that HSA account

[00:25:15] completely tax free and use it for whatever we want because we've literally kept the receipts.

[00:25:23] Yeah. So, so that's, that's the second road. I think maybe I got too far ahead of myself. The

[00:25:27] first road is if you're contributing to your HSA and you're maxing that out, that's going to grow.

[00:25:32] As long as you put it in an investment vehicle, it's going to grow and you don't touch it and you

[00:25:36] don't touch it. And so you can pull the money out at any time in the future for medical expenses,

[00:25:41] expenses. But if you keep your receipts and prove that you've already paid for those medical expenses,

[00:25:46] it's basically saying I'm paying myself back for what I paid out of pocket from my HSA. See,

[00:25:51] I kept my receipts. Exactly. Exactly. It's a really smart strategy. And I will say,

[00:25:55] I know that I have, I want to apologize on camera. Oh, please continue.

[00:26:01] I have been such a brat about keeping my receipts over the years. I'm so sorry.

[00:26:06] Um, I, I know I said earlier in the episode that I had a couple of like medical expenses and a couple

[00:26:12] of procedures. And I, while I did keep my receipts, I did not put them in the spreadsheet.

[00:26:18] So we don't get credit for them until Matt was going over the spreadsheet. I don't know. It was

[00:26:22] a couple of weeks ago. He was like, did you put these in the, in the spreadsheet? I was like,

[00:26:25] Oh, I don't know if I did. I don't know if I did. I knew that I didn't. I knew that I didn't.

[00:26:28] I'm so sorry. I will be better. I'm learning and growing every day.

[00:26:33] It's all that means is that we don't get to pull it out for maybe a down payment.

[00:26:37] I knew that we would do it. I just had not done it yet. And I also knew that you would do it if I

[00:26:41] pouted about it. So thank you. You're welcome. Go team. I will say, uh, that, you know,

[00:26:48] these numbers sound small at the moment, like, you know, what is $8,000 a year? But if you think

[00:26:55] about the grand scheme of things, like most people, again, in our community are working

[00:27:00] about 10 to 20 years or so before retirement or before they decide to leave their W-2 job,

[00:27:05] which maybe you don't have the ability to do an HSA anymore. But what is 20 years of growth?

[00:27:12] I think is worth talking about. I mean, even five years of growth.

[00:27:14] Well, I did the math. So I got a little example. So to put this in perspective for people listening,

[00:27:20] right? What we do is we start with $0 and we are expecting a 20 year growth time horizon.

[00:27:28] And we're going to just for shock value, stick to the, you know, average market return of 10%.

[00:27:35] Okay. So if you're contributing $8,000 or $8,300 a year, this is 2024 numbers. Okay. So 8,300 a year

[00:27:44] for 20 years at 10% growth, which again, that's just putting it into an index fund and leaving it

[00:27:52] alone, not touching it. Then in 20 years, you'll have $501,000 sitting in that account,

[00:27:59] doing nothing other than maxing out the account and investing it. Now, if you maxed out the and

[00:28:05] invested it and you kept your receipts, then that's $500,000 that you can pull out for any reason,

[00:28:13] any reason. If I wanted to take you on a massive vacation with the kids or buy the kids a home,

[00:28:18] I can pull that money out and do that. If you kept the receipts, if you didn't keep the receipts,

[00:28:24] that's still $500,000 sitting in an HSA account that you can use for healthcare related purposes

[00:28:31] at any time. And given that the average healthcare expenses for a adult is about $300,000.

[00:28:40] $300,000, you're sitting pretty, I think. In a lifetime?

[00:28:43] In a lifetime. Okay.

[00:28:44] Depending, you know, it's average health, right? So, but yeah, if you know that you're going to be,

[00:28:48] we all get older, we all have healthcare expenses. Having an account that's tax advantaged is

[00:28:54] extremely valuable. And I think under advertised maybe, right? Like I know the government has

[00:29:00] given us this kind of gift, but we're not using it all that well.

[00:29:04] Right. And I think that leads into today's fun five facts. Okay. Okay. Give me your fun five facts.

[00:29:11] Okay. So I'm going to make sure I read this correctly because it's part, it's part of the

[00:29:15] excitement that I get out of this. Okay. All right. So do you want to take a stab at how many,

[00:29:22] like what's the percentage of HSAs that have the money in it actually invested? Any idea?

[00:29:30] Yeah. Like if you, if I had to guess, 18%. It's a good guess. Okay. It's totally wrong. Oh. So

[00:29:40] right now for all of the money going into HSAs, only 8% of those accounts are actually invested

[00:29:48] in the market or in some sort of investment vehicle. So think about it. We're doing a

[00:29:53] horrible job in the U S taking advantage of what this account actually offers. And that's why we're

[00:29:59] trying to get the word out there. Cause I think that if, if this is a benefit that your job offers,

[00:30:05] why the heck are you not taking advantage of it? It's triple tax advantage. It is. It is the single,

[00:30:10] it is the single greatest retirement vehicle that's out there. It's better than a Roth IRA

[00:30:16] because of the triple tax. Yes. Right. Okay. I also have a fun five fact. Oh, you have one too.

[00:30:24] Bring it on. Yeah. About HSAs. Okay. I looked it up on the way here. Um, account holders over 55

[00:30:30] had an average balance of 5,700 at the end of 2023, 5,000, 5,700 over 55. That's the balance of the

[00:30:42] HSA. Yes. That's the balance. So it sounds like the most people who the majority of people who are

[00:30:47] using HSAs are contributing to it, but then spending from it. Yeah. So, which I think is what it was

[00:30:54] built for people to do in a way, but because of the rules of the way that it's set up, you can use it

[00:31:01] in this sort of weird five strategic way that we do. And we recommend, yeah, it's really helpful.

[00:31:08] Once you know the rules of the game, because this is a very particular card that we can play

[00:31:13] to really help you win the game. Yes. And there isn't a better account out there today, which is

[00:31:19] so weird to say, because you're right. When you talk about HSA, all your employer information that

[00:31:24] they give you in that packet beginning of the year is going to be about how you spend it for

[00:31:29] your healthcare purposes. But if you're relatively healthy, this is the option where you just set it

[00:31:35] and forget it. You do not touch it. You pay out of pocket to keep the receipts. And then 20 years

[00:31:39] later, you'll have half a million dollars in that one account purely by maxing it out and leaving it

[00:31:46] alone. Nice. Now I saw in the show notes for this episode, you had something in there about

[00:31:53] being aware of HSA dash FSA plans. Yeah.

[00:31:59] So are there plans that are both an HSA and an FSA that you have to be careful of?

[00:32:06] Yeah. So the big, I think we mentioned this earlier, but the big difference between a health

[00:32:10] savings account and a flexible spending account is they're both earmarked for healthcare spending,

[00:32:19] but the flexible spending account is not going to roll over at the end of the year.

[00:32:25] So it's use it or lose it. You are contributing money from your paycheck into this saying that,

[00:32:32] Hey, I think I'm going to spend $5,000 in healthcare. And what if you don't spend $5,000?

[00:32:38] What happens with that money?

[00:32:39] You lose it to who?

[00:32:41] The employer takes the money.

[00:32:42] Wow.

[00:32:44] It's a bet.

[00:32:44] It's a bet.

[00:32:45] So there are ways to optimize this even further.

[00:32:48] Okay.

[00:32:49] Right. So if you know, for example, that I want to buy band-aids and tampons this year,

[00:32:54] I'm going to put $300 in this account. It's tax advantaged. You could do that. It's a little anal

[00:32:59] to me, which is funny because I also like to take advantage of this, but I hate the idea of

[00:33:05] forgetting to spend something. I don't like to buy things in general. So it's incentivizing me to

[00:33:10] spend, which is the opposite of what I try to do, which is incentivize not to spend.

[00:33:13] And the health savings account is your account. If you leave your employer,

[00:33:19] you take it with you. It rolls over every year and grows. That's a really good reason to just

[00:33:25] stick with that one first.

[00:33:27] Now I have a question. When you leave an employer and you have money in an HSA,

[00:33:32] do you then have to reinvest it into a different account like you would a 401k?

[00:33:37] Well, it's very similar to 401k. You don't have to move it, but you can.

[00:33:41] And I think just for simplicity sake, if you leave an employer and as long as the

[00:33:46] expense ratios are comparable. For how you're investing it.

[00:33:51] Yeah. Sometimes an employer might have a really good low cost investment option and I will keep

[00:33:57] it at my old, call it Fidelity HSA, instead of rolling it over to my new health equity account

[00:34:03] because there's a better investment option over there. But once you leave all your jobs, which is

[00:34:08] what I've done basically for my last job, I need to still roll it over to a cheaper,

[00:34:14] more cost effective plan. And I'll do that this year.

[00:34:18] Okay.

[00:34:19] Yeah. But you asked if an HSA can be used with an FSA and the answer is yes, but don't confuse

[00:34:27] the two. They're entirely different.

[00:34:28] Right.

[00:34:28] Yeah. So oftentimes you can still qualify for a FSA with a high deductible healthcare plan.

[00:34:36] Okay.

[00:34:36] Yeah.

[00:34:37] Great. Now, since we've gone over all the details of the HSA and how to keep your receipts,

[00:34:44] I had thought about doing a follow-up episode going over your spreadsheet that you've created

[00:34:50] to track all of this. I don't know if it would necessarily warrant an entire episode,

[00:34:54] but I love the idea of including a version, a template of what you've created, because it is

[00:34:59] really great and useful in the show notes for other people to use and play around with. So they can also

[00:35:05] start keeping track of what they got going on.

[00:35:07] Yeah. I can definitely attach that. I think you're right. You know, when, when I first learned about

[00:35:11] this, I did some research online and I couldn't find a template. So I just made one on Google sheets,

[00:35:17] but I'm happy to share it. I think it's very basic and the idea that again, like, you know,

[00:35:23] what is the expense when you're spending it? And then what's the vendor name. And then I've got some,

[00:35:28] you know, formulas and such that let me know where we're at in terms of how much I can actually pull

[00:35:33] out without penalty. And so, yeah, I'll attach that in the show notes so everybody can have it for free.

[00:35:39] For free.

[00:35:40] For free.

[00:35:40] All right. Well, just to wrap up this episode, I would love the listeners, all of our listeners to

[00:35:48] let me know what they think the count is for how many times we have said

[00:35:52] triple tax advantage in this episode.

[00:35:55] Fair. So before we wrap up, I do have an important

[00:36:02] hack that even I wasn't aware until I started researching about this. I think it's really

[00:36:06] helpful to share. Oh, right. Okay. So if you have a high deductible healthcare plan and you're

[00:36:12] contributing to an HSA and let's say you're within your family, you have adult children who are under

[00:36:19] than under 26, but are no longer considered, um, uh, dependence on your, on your tax base,

[00:36:27] then those people can contribute to the family match as well. So let's say for example, you have a 20 year

[00:36:36] old kid. So you have two 20 year old kids. Okay. Okay. And they're on my healthcare plan until

[00:36:42] they're 26, but they're not part of my taxes. Got it. Okay. Those kids, kids can contribute

[00:36:50] $8,550 on their own, on their own account. Both of them individually, $8,550.

[00:37:01] This is the thing that you were telling me a couple of weeks ago.

[00:37:03] Yeah, exactly. So if, if they, and this isn't just adult kids, but it's, um,

[00:37:09] adult dependents on their own that file their way. No, it's essentially adult kids or domestic

[00:37:15] partners. Got it. Right. Right. And so if you have a kid in college, they can contribute $8,550

[00:37:23] to this triple tax advantaged account to allow it to grow tax free in perpetuity, which is an

[00:37:31] amazing benefit that is sorely hidden amongst all the tax documents out there. But it's a huge benefit

[00:37:37] that we have not been taking advantage of and we definitely will move forward. So, well, our kids

[00:37:43] aren't old enough yet, but well, one day they will be one day. They're not going to be on our, uh,

[00:37:50] not gonna be dependent. Right. So that would be a very easy thing for us to be able to help them do.

[00:37:55] And as long as they're earning income, we could actually give them the $8,550 contribute so they

[00:38:01] can contribute on their behalf while they're in school, say. Right. So it's just, which saves

[00:38:06] them on their taxes and it saves them. Well, they're going to be, yeah, exactly. Yeah. They're

[00:38:11] probably going to be a lower tax bracket as a student anyway, but let's, let's lower it as much

[00:38:14] as possible. It's a zero one. Awesome. Great. Okay, cool. So let's do a quick, uh, summary.

[00:38:21] All right. So if you have, if you qualify for an HSA and you have a emergency fund that can cover

[00:38:27] your healthcare expenses minus, uh, catastrophic insurance, which is what the HSA qualifies for.

[00:38:34] So if you get cancer and it's going to be hundreds of thousands of dollars, you are covered through

[00:38:38] your employer for, for at least a good portion of that. And so you don't have to worry about getting

[00:38:42] cleaned out. But if you have, you're relatively healthy and you have an HSA, you want to max it

[00:38:47] out through payroll every year, right? You're going to cashflow your medical expenses and keep your

[00:38:53] receipts and log with them. And then you're going to invest that amount of money, anything over the,

[00:38:59] uh, cash limit that they require into some sort of investment vehicle that will grow over time.

[00:39:06] And you set it and forget it. You keep doing that every year and you just enjoy the ride.

[00:39:12] Yep. Yeah.

[00:39:13] That's one of the, uh, jewels in the crown for setting yourself up for success in retirement.

[00:39:19] Yeah, exactly. And 20 years later, you get half a million dollars for very little work,

[00:39:24] which doesn't suck.

[00:39:25] No, no, take that. Take it to the bank. Exactly.

[00:39:28] Awesome. Well, I think that's all we got.

[00:39:30] Yeah. Thanks everyone so much for joining. Let us know if you have any questions and we'll

[00:39:34] see you next time.

[00:39:35] Thanks for tuning in.