Episode 150: How Does a Health Savings Account Help Me Save Money?

Posted Oct 15, 2020 | Chris Petrie

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What is a Health Savings Account?

A Health Savings Account (HSA) is a tax-advantaged account created for individuals who are covered under high-deductible health plans (HDHPs)

In order to have an HSA, you must be in a HDHP

Must be inside a High Deductible Health Plan (HDHP)

  • $1,400 deductible single
  • $2,800 deductible family
  • $6,900 maximum out of pocket for single
  • $13,800 maximum out of pocket for family

Who Qualifies for HSA?

  • Employees, self-employed, and unemployed 
  • You can’t have health coverage elsewhere
  • You can’t be enrolled in Medicare
  • You can’t be claimed as a dependent on someone else’s tax return

How much can you put in HSA (2021)?

  • $3,550 single
  • $7,100 family
  • $1,000 extra 55 and older
  • Contributions made by your employer are included in limits

How Does a Health Savings Account Help Me Save Money

An HSA can save you thousands of dollars per year because of the tax advantage and lower premiums. HSAs transfer risk away from the insurance companies and onto the owner of the HSA. This in turn lowers your monthly premiums and allows you to use tax-free dollars for medical expenses.

In addition to tax-free deposits and withdrawals, any growth inside the HSA (investment) is also tax-free.

Frequently Asked Questions

Will I lose the amount inside the HSA if I don’t use it in the calendar year?

No. HSAs are different from the use it or lose it Flexible Spending Accounts. These are meant to be used for long-term savings and you can roll over your HSA into the next year (ongoing).

Are monthly premiums tax-free?

No. However, Medicare premiums can be used with tax-free dollars from inside your HSA.

What if I don’t use the funds for qualified medical expenses?

You will have to pay the income tax on whatever was withdrawn and a 20% penalty if before age 65.

What if I switch jobs?

Just like a 401(k), you own the HSA and it goes with you if you leave your employer. Also, if you are self-employed you can open your own HSA at Lively.

Open Your Own Health Savings Account at Lively HSA

Self-employed, retired or unemployed? You can still contribute and invest inside your Health Savings Account at Lively.

A Budget Goes Hand in Hand with an HSA

Now that you have a pretty good idea of how a Health Savings Account works, I am going to encourage you to start a simple budget.

Here are the same budget templates I use and I will also walk you step-by-step with how to use them. If you have any questions at all, please post in the comments section below.

Good luck and congratulations on your HSA and your new budget!

Thanks so much for listening to the show and if you feel the content of this podcast was helpful, please subscribe to the podcast where you listen and leave a review!

Today’s show was brought to you by OneAZ Credit Union — my very own credit union I have been proud a member of since 2011. 

If you live in Arizona and are looking for a large credit union with a local, customer-focused feel for your personal or business banking needs, look no further than OneAZ Credit Union.

Chris Peach Author 150x150

Chris Petrie

Chris (Peach) Petrie is a personal finance expert, money coach, speaker and podcaster.

In 2011, Chris and his family were exhausted from living paycheck-to-paycheck and facing a mountain of debt. They started going against the society standards of misbehaving with money and made the decision to take back control of their lives and money. Within seven months they paid off $52,000, started saving like crazy and began building real wealth.

The word spread fast and Chris started showing friends how to create a budget over dinner. Soon after he started showing their friends how to do the same and eventually Chris started teaching personal finance classes around the community. As the need for the classes grew, Chris launched Money Peach in 2015.

Money Peach was created to help everyday people remove the stress and fear of money by showing them how to save more, make more, and keep more of their money.

Chris Peach has been featured in places like Business Insider, The Huffington Post, Elite Daily, and CheddarTV.

When Chris isn’t at “work” he can be found at the Crossfit gym or riding on the fire truck — Chris is also a full-time firefighter in Phoenix, Arizona.

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