Understanding Health Savings Accounts (HSAs)

Using a Health Savings Account (HSA) is a prudent financial decision that many Americans overlook or simply do not understand. One of their primary benefits is that contributed funds do not run out each year like a medical savings account. Instead, unused funds roll over each year and can be used for future medical expenses. This feature creates a unique planning opportunity to help cover future medical expenses, which is important since it is well documented that medical expenses are the largest expense for many in retirement. Furthermore, a retiree can use a health savings account even when on Medicare to cover medical expenses.

Here are some important facts to keep in mind when it comes to an HSA:

  • They must be under a high deductible health plan.
  • Funds can be used for current or future medical expenses.
  • Contribution limits are set by the IRS ($3,550 if single or $7,100 for family).
  • You control the assets and they are portable if you retire or switch employers.
  • Contributions are 100% tax-deductible and withdrawals are tax-free for qualified medical expenses.

Who qualifies for an HSA?

To qualify, you must be enrolled in a high deductible plan that is compatible with an HSA and you can’t be enrolled in another health plan or in Medicare (funds acquired through an HSA prior to using Medicare can be used, however).

If you have any questions, your best option is to simply inquire with your employer and see if you qualify for an HSA.

What are the tax implications of an HSA?

Contributions up to IRS limits of $3,550 single or $7,100 family are 100% tax-deductible. The money will grow tax-deferred and is tax-free if used to pay qualified medical expenses.

Other factors to consider

Assets in the health savings account can be invested in ETFs, mutual funds, or held in cash. A person can do a partial rollover from an IRA into an HSA (within IRS limits) as well to help fund the HSA. The amount you contribute is an important consideration and it is best to consult with a Financial Advisor to best understand how you can potentially benefit from an HSA and determine what amount is most beneficial for you to contribute.

BFSG Named to 2020 Financial Times 300 Top Registered Investment Advisers

BFSG is pleased to announce it has been named to the 2020 edition of the Financial Times 300 Top Registered Investment Advisers. The list recognizes top independent RIA firms from across the U.S. The final FT 300 represents an impressive cohort of elite RIA firms, as the median AUM of this year’s group is $1.9 billion. The FT 300 Top RIAs represent 39 different states and Washington, D.C.


Disclaimer: Awards and recognitions by unaffiliated rating services, companies, and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if the Firm is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement of the Firm or its representatives by any of its clients. Rankings published by magazines and others are generally based exclusively on information prepared and/or submitted by the recognized adviser. The Firm did not pay a fee for inclusion on this list.

How to Find a Financial Adviser