HSA – Health Spending Accounts
Keith Whitcomb, RMA, Perky discusses the tax advantages of HSA's - Health Savings Accounts.
Key Takeaways
- Contribute to your employer's 401(k) first only if the match is 50% or greater; otherwise, max out your HSA contribution first due to its superior tax treatment (tax-free contributions, growth, AND withdrawals plus FICA tax savings).
- Keep enough liquid funds in your HSA to cover your plan's out-of-pocket maximum and deductible (accounting for annual resets), then invest surplus balances in a diversified portfolio aligned with your time horizon—similar to your 401(k) allocation.
- Once your HSA reaches approximately $10,000-$11,000 in surplus after covering medical expenses, begin investing the excess; accounts opened in 2004 averaged $58,000 by 2020, demonstrating significant long-term growth potential.
- Check HSAbank.com for the current list of qualified medical expenses, as the CARES Act expanded eligible items to include over-the-counter medications without prescriptions, increasing HSA flexibility.
- Use HSA contributions to earmark specific savings for retirement healthcare expenses (which Fidelity studies show are substantial), allowing your 401(k) contributions to focus on other retirement needs and maximizing tax-advantaged savings across accounts.
HSA - Health Spending Accounts: In this video, Keith Whitcomb, RMA, Perky discusses the tax advantages of HSA's - Health Savings Accounts.
A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals save for and pay for qualified medical expenses. HSAs are available to individuals enrolled in a high-deductible health plan (HDHP). click on this link to learn more about HSA's:
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