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What You Need To Know About HSA Accounts

Cypress Wealth Services

September 2020

ln theory we all know that medical bills can be ridiculously high. But did you know that the average medical bill for a heart attack is $20,246? (*1)  With a number this staggering, it’s no wonder people are more afraid of healthcare costs than the sickness itself. (*2)

Unfortunately, these costs will only continue to rise, but we’re not completely powerless. There are many ways to plan for rising healthcare costs, and the most popular option is with a health savings account (HSA). An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. (*3) It’s used in conjunction with a high-deductible health insurance plan. Allow me to explain in more detail.

HSA Tax Advantages

Using an HSA has three major tax advantages:

  1. You make pre-tax contributions (lowering your total tax liability at the end of the year).
  2. You make tax-free withdrawals for qualified medical expenses.
  3. Your funds grow tax-free.

As long as you use an HSA for its intended purposes, you never pay taxes on the money in the account. Think of it as a tax-free trust for your health. The only time you may be subject to taxes or fees is if you contribute more than the maximum yearly amount or use the funds for non-qualified expenses.

Is An HSA The Best Fit For You?

Aside from HSAs being tax-free in every sense of the word, there are a few more reasons why it might be the ideal solution to your healthcare worries.

  1. Many employers offer HSA contribution matches: Similar to a 401(k) contribution match, if your employer matches $500 per year, for example, you can also contribute $500 and see a 100% return on your money. 
  2. Your HSA funds roll over year to year: Unlike flexible spending accounts (FSAs), your HSA funds stay with you indefinitely, even if you switch jobs or no longer have a high-deductible health plan. These funds have no expiration date.
  3. It’s an efficient way to fund healthcare costs in retirement: You can invest your HSA money in ETFs or mutual funds once you have a certain amount in your account—usually around $2,000. If you choose to invest your HSA funds instead of using them for day-to-day healthcare expenses, you can build your own separate “healthcare” nest egg for retirement.

HSA Eligibility

To qualify for an HSA, you must meet the following requirements: (*4)

  • Be covered under a high-deductible health plan
  • Have no other healthcare coverage
  • Not be enrolled in Medicare
  • Not be claimed as a dependent on someone else’s tax return

The contribution limits for 2020 are $3,550 for self-only plans and $7,100 for family plans. (*5) If you’re age 55 or older, you can make an extra $1,000 per year in catch-up contributions. You can use funds from your HSA at any time, but you can only make contributions while you’re enrolled in a high-deductible health insurance plan. 

We’re Here To Help

I’m sure it’s not surprising to hear that out of all retirement worries, 41% of Americans are most worried about healthcare costs. (*6)  As you prepare for your golden years, a health savings account is a great way to alleviate this stress. But before you set up your HSA, it’s important to meet with a knowledgeable financial advisor who can help you maximize its benefits for retirement. Our team at Cypress Wealth Services is here to walk you through the fine print and show you how to use it in the most tax-efficient way. To get started, contact one of our offices today. We look forward to hearing from you!


About Cypress Wealth Services

Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit or call 760.834.7250.