HSA for America

How to use an HSA, based on your stage in life

June 5, 2009
Vol. 5, Issue 5

The number of people with HSA-qualified health insurance plans is exploding, growing by 30% in just the past year.  Contrary to statements by those who wish for a single-payer bureaucracy controlling your healthcare, HSAs are not just for the rich.  In fact, our clients range from 24 year-old recent college graduates, to couples nearing retirement, and include the wealthy and not-so-wealthy.

HSAs for Young People

One of the reasons that HSA plans are so popular among young people is that they are very inexpensive.  It is not uncommon for someone in their 20’s to be paying less than $70/month for a plan that offers up to $3 million in lifetime benefits.

Young people have such low premiums because they tend to be very healthy, and less likely to use their coverage.  If that is indeed the case, then any money they put in their HSA has the opportunity to earn compounded tax-free returns, possibly for 40 years or longer.  With the Medicare trust fund scheduled to run out of money in just eight years, having a private nest-egg for retirement has never been more important.

Because a young person is much more likely to need their health insurance to cover an accident as opposed to a sickness, most of our young clients add a $100 accident plan to their high deductible HSA plan.

HSA Plans for People in Their Middle-Years

My 46th birthday was this month, and the term “middle-aged” just doesn’t sit right with me.  I’m taking care of myself, so I expect to stay in pretty decent shape as my son grows up.  But about the time he graduates from college, I’ll be staring retirement in the face.  I’m sure it will be here before I know it.

Having a family can mean a lot of medical expenses, even if everyone is pretty healthy.  There are checkups, immunizations, eyeglasses, braces, cough syrup, and who knows what else.  But fortunately, having an HSA makes all of these expenses tax-deductible.  Simply pay for the medical expense with pre-tax dollars from your HSA.  Or do as I do, and simply save your receipts for reimbursement at a later date (after the funds have had a chance for more tax-free growth).

Remember to always maximize the contribution to your HSA before funding your IRA or other retirement accounts, since only HSA withdrawals are tax-free for medical expenses.

HSAs for Those Approaching Retirement

It is kind of a scary time to be looking at retirement.  It is almost certain that government retirement benefits will be cut, as there is simply not enough money available to even cover current liabilities.  Even if Medicare does not run out of money, the average couple retiring today is expected to spend $240,000 on medical expenses during their retirement.  If your retirement is in about 20 years (as mine is), you can expect to spend nearly $400,000 on medical expenses.

Most people approaching retirement are looking at ways to put aside more money, and protect their assets from taxation.  The very best vehicle to do this, out of everything available in the investment universe, is an HSA.  That is because you get to deposit pre-tax dollars (like with a Roth IRA), but you do not have to pay taxes upon withdrawal if the money goes towards a medical expense.  The 2009 HSA contribution limits are $3000 for individuals, and $5950 for families.  Those over age 55 can contribute an additional $1000.

To further protect their assets, we help many of our clients in this stage find answers to their retirement planning and long-term care needs.

HSAs are Your Best Bet

If you are reading this, chances are you already have joined the over 8 million people who have HSA plans.  If so, I encourage you to take full advantage of the tax benefits by maximizing your contribution, and making sure you track every single little medical expense you incur so you can reimburse yourself tax-free.

If you don’t yet have an HSA plan, we’re here to help.  As more and more people carry HSA plans and become educated and involved healthcare consumers, the medical marketing place will respond with more competitive pricing and all consumers will benefit.  A consumer-driven healthcare solution truly is the best bet, for you, and for our nation’s healthcare challenges.


To your health and wealth!

Wiley Long
President - HSA for America

P.S. – Next month I’ll talk about important questions to ask your surgeon or physician, before the procedure.


HSA for America
749 S. Lemay Ave, Suite A3-116
Fort Collins, CO 80524
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