Military Family Investing

5 Takeaways from “HSA Owner’s Manual”

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by

kingmarine
in

“HSA Owner’s Manual” by Todd Berkley is a must-read for everyone. Although many people will never be eligible for a Health Savings Account (HSA), it is good to know their benefits. 

HSAs are triple tax-protected savings vehicles, where owners can use distributions on qualified medical expenses. Triple tax-protected means that contributions, growth, and distributions are all tax-free on qualified medical expenses.

I have Tricare; therefore, I am not HSA-eligible. However, my sons may be eligible upon turning 18 and can leverage HSAs for significant saving and investing advantages. 

1) An HSA account and an HSA-qualified medical insurance plan go hand-and-hand. You cannot create an HSA without an insurance plan.

2) It is tough to become HSA-eligible and find an HSA-qualified plan. Your state plan has to meet the federal minimum requirements for HSAs to be eligible. 

3) Once you have money in an HSA, you can use it on qualified medical expenses for the rest of your life. This is important because you may become HSA-ineligible later in life but can still use your HSA savings. 

4) Once you turn 65, your HSA acts like a Roth IRA. You can pull out money without penalty, but you will pay taxes when you don’t use distributions for medical expenses.

5) You can defer taking distributions on your medical expenses as long as you want. So you can pay for your 2022 medical expenses in 2042, as long as you keep the receipts. This allows you to pay for expenses with future growth.

One of my favorite rules is that your child can have an HSA at age 18, even if you cover them under your medical coverage. 

Thus, if I have my son on Tricare from age 18-26, he can contribute to an HSA. If he can max this out each year, it’ll be enough to set him up for life. Also, you can pay long-term care insurance from your HSA account. 

HSAs are a fantastic tax vehicle, but getting yourself into a plan is tough. It takes planning to get everything working right. Also, anyone can contribute to your HSA. I would like to ensure my two sons build HSAs early in life.

I am a huge fan of Health Savings Accounts. It takes a lot of reading and knowledge checks to become proficient at using an HSA. However, the juice is worth the squeeze. Good Luck!

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