Inside The Plan

HSAs as a Retirement Strategy

In today’s episode of the “Inside the Plan with the 401(k) Brothers”, host Bill Bush and Andy Bush, advisors at Horizon Financial Group talk about HSAs as a Retirement Strategy. They take us through Health Saving Plans which can also be Retirement Plans, and these health saving accounts can actually be valuable over time that you can access in retirement. Bill and Andy are going to go through some of the basics and how it might work in your situation.

Episode Highlights

• 01:00 – You can only have an HSA (Health Savings Accounts) if you participate in a certain type of plan which is a high deductible healthcare plan.

• 03:00 - To draw the differences of the catch-up provision in a 401 K plan, that catch-up triggers at age 50. So, you can put more into your 401 k when you are 55.

• 06:00 – One advantage of a flexible spending account is that you can carry over dollars from year after year, and there's no time limit for using the money.

• 08:00 – HSA also covers some of the qualified medical expenses needed to maintain your health or maybe prevent certain health issues.

• 10:20 – Another benefit of having HSA is that not only would you be able to reimburse your future qualified medical expenses, but you can also start to reimburse your past qualified medical expenses and be able to get money out of an account tax-free.

• 12:00 – At the time of retirement if you had a major surgery where the out-of-pocket expense is a lot then if you had the qualified medical expenses balance saved up in the HSA, then you can use that.

• 14:00 - There's a spectrum here of how people use their HSA. So some people enroll in a high deductible plan and don't even use the HSA or they don't contribute.

• 16:30 - People that are in the higher income group, maybe the top 20% or top 40%, their life expectancy is a little longer than those that are in the lower income range.

Three Key Points

1. If you have a high deductible health plan, within HSA or Health Savings Account, you can contribute a pretty good amount into the Health Savings Account. You're still paying your premiums for the High Deductible Health Plan, but you can make contributions to this Health Savings Account and this is the definition of a High Deductible Health Plan. So, for 2022 IRS defines it as a plan with a deductible of at least $1400 for an individual, or 2800 for a family. The High Deductible Health Care Plan can't be more than $7,050 for an individual or 14,100 for a family, per year.

2. If you happen to be a healthy person, and you're in a High Deductible Health Plan that has an HSA, it can be a very valuable tool for you over time. You can reimburse yourself for qualified medical expenses from your HSA but there's no time limit on those medical expenses. So, you can start compiling any medical expenses you had in the past. if you can pay those out-of-pocket, you can do that, but not out of your HSA. Then down the road when you get into retirement, you can come back and reimburse yourself for those medical expenses. Another beautiful thing about the High Deductible Plan is that there is a limit to how much you're going to have to pay for things that are more catastrophic.

3. There was a great study done recently that dropped the spending state savings and spending study and what they saw was two of the top three retiree spending concerns are Health Care Premiums, Insurance Premiums, and Out-of-Pocket Health Care Expenses. People fear having to pay those because it's something they know that they're going to have to pay, but it's way out there in the future.

Tweetable Quotes

• “The maximum amount in 2022 that you can contribute to if you're a single person to the HSA is $3,650.” - Andy Bush

• “The first thing you need to check is if your employer offers an optimal health plan?” – Andy Bush

• “The beauty of HS is that there's just the Triple Tax Advantage.” – Bill Bush

• “A lot of the HSAs have a little card like a debit Fount.” - Andy Bush

• “You can save and this comes in handy for folks that have already maxed out their 401k and are looking for other places to put pre-tax dollars.” – Bill Bush

• “I think finally; Andy's favorite word is wherewithal.” - Bill Bush

Resources Mentioned

• Horizon Financial Group: Website

• Contact Information: Bill Bush Andy Bush

Podcast Editing

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