10 Tips for Maximizing Your Financial Plan in 2023: Tip 6- HSA’s

In 2023, maximizing your financial plan involves making the most of Health Savings Accounts (HSAs), according to Matt Blocki. HSAs are recommended for healthy families with higher deductible health insurance plans, allowing tax-free contributions, tax-free growth, and tax-free withdrawals for medical expenses, including Medicare costs during retirement.

For 2023, families can contribute up to $7,750 per year to an HSA, with an additional $1,000 catch-up contribution for those aged 55 and over. To qualify, the family must have a health insurance plan with a deductible of at least $3,000.

The key decision lies in comparing lower monthly premiums with a higher deductible HSA plan versus higher premiums with lower out-of-pocket expenses. Matt emphasizes that the tax savings often offset the deductible, making HSAs an attractive option. Couples can also leverage HSAs by having one spouse contribute while the other maintains coverage for a child to qualify for family contributions.

However, Matt warns that many people forget to invest their HSA funds, which can lead to missed investment opportunities. He recommends ensuring that the majority of HSA funds are invested to maximize their growth potential.

Video Transcript

Hello, Matt Blocki with EWA. Today we are talking through ten tips for 2023 and how to maximize your financial plan. Tip number six for 2023 how to maximize your financial plan is health savings account.

So a health savings account is something that we high highly recommend for those that it’s appropriate to. So if you have a family that’s generally healthy and have a health insurance option that has a higher deductible, that allows you to do a health savings account, this is money that you can contribute in tax free.

It grows tax free and then it comes out tax free if it’s used for Medicare costs. So this is actually something we recommend for most clients to fund in, maximize the account every year, invest the money in all equities, let it grow.

Because the biggest expected cost during your retirement is actually healthcare. And this can be used for Medicare premiums, it can be used for all kinds of qualifying expenses when you retire. And having a mechanism to pay for all those health care costs with inflation being what it is in a tax free manner can be a complete game changer in your financial plan.

So let’s break this down in 2023. As a family, you can now contribute $7,750 per year into an HSA if you’re under the age of 55. If you’re over the age of 55, you contribute an additional $1,000 in. Now, something we want to make sure that is relevant is you have to have a deductible as a family of at least $3,000.

So the question then becomes what is better? Do you pay a higher amount for health insurance, higher guaranteed cost that’s coming out of your paycheck if you need it, less out of your pocket. If you don’t need it, it’s just wasted money.

Versus if you go with an HSA, pay a lower amount per paycheck. But if you need it, you’re going to have to come out of pocket $3,000. Depending on your tax rate right here, there’s a significant if you’re in a 37% tax bracket, for example, or in the mid 30s, there’s going to be over $2,500 a year that you save in taxes just by putting the money in and taking that tax deduction.

So the tax savings alone almost offsets the deductible amount completely. And then the monthly premiums that you’re saved from having a lower cost on a monthly basis from a premium plan, it’s just money in your pocket.

So unless there’s something that you know is coming out of the ordinary, a surgery, or you know, you’re going to hit the deductible. For most families, it does make sense to have an HSA. And one quick trick if you have two spouses working at two separate jobs, if one spouse does the HSA and the other spouse doesn’t, as long as the one spouse has a child on the plan, they still qualify for the family and can contribute the full $7,750 per year.

So we recommend this is an individual analysis. We should look at all options. Look at your individual health forecasting, individual health costs that are going to come up for the year. And then something we’re really careful about is HSA plans really make a lot of money because most people forget to invest the money.

And then if the money is just sitting there in cash, they’re lending it out to different people, and they’re making the spread on that. So we want to make sure that that money gets invested immediately.

Most HSAs require $1,000 balance that stays in cash, but then the rest can be swept over. This requires manual work to be swept over into an array of investment options and then invested accordingly.

So something we would highly recommend to look into if this is an option through your employer and then to implement accordingly.

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Playlist

10 Tips for Maximizing Your Financial Plan in 2023

10 Tips for Maximizing Your Financial Plan in 2023: Tip 1- 401ks and 403bs
10 Tips for Maximizing Your Financial Plan in 2023: Tip 2- Roth IRAs
10 Tips for Maximizing Your Financial Plan in 2023: Tip 4- Allowable Income for 401k and 403b
10 Tips for Maximizing Your Financial Plan in 2023: Tip 3- Traditional IRA Planning
10 Tips for Maximizing Your Financial Plan in 2023: Tip 5- Social Security Tax
10 Tips for Maximizing Your Financial Plan in 2023: Tip 7- Tax Bracket Management
10 Tips for Maximizing Your Financial Plan in 2023: Tip 8- Estate Planning
10 Tips for Maximizing Your Financial Plan in 2023: Tip 9- 529 Plans
10 Tips for Maximizing Your Financial Plan in 2023: Tip 10-Standard Deduction

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