Why Max Out Your HSA | BeatTheBush

Have you noticed that little thing in your pay benefits such as the HSA account that requires a high deductible health plan? It may see a bit random but this savings vehicle is actually a very useful tool to help you reduce you taxable earnings! Typically, you can use the money in your HSA tax-free for qualified medical expenses. But why should you only contribute what you use in one year? Why not just max it out because you will eventually use this money for medical expenses anyway? Worst case is you contributed too much but you can still take this out of your HSA after 65 and you only have to pay income tax with no additional penalty. It has the advantages of a 401k PLUS being able to use it tax free now on medical expenses. Therefore, this should be prioritized over 401k contributions but AFTER 401k matching.

How’s it goin everybody this is beat the bush i’m sure you’ve heard of an hsa account which is a health savings account from your employer when i first heard of an hsa i didn’t pay much attention to it mainly because i just thought it was for medical expenses and so me being a young healthy adult i only needed you know couple hundred dollars in my hsa per year

So i didn’t really go all out and just max it out or anything but did you know you should really max out your 401k matching first and right after that you should be maxing out your hsa which is roughly $3,400 for 2017 then you should go back to try and max out either your roth or your 401k the hsa contribution limits is actually separate from your 401k your 401k

Allows you to contribute up to eighteen thousand dollars of tax deferred money whereas an hsa allows you to contribute an additional $3,400 so if you combine those two you get a total of 21 thousand and four hundred dollars worth of tax deferred payments now here’s a way to think about your hsa after you do one on one matching when you put money in your hsa it’s

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Really for medical expenses so if you have enough buffer money in there you can just pretend this is your medical expenses only and whenever you spend stuff on medical you do not have to pay taxes on it so if you pay into this and kind of use this kind of like a buffer bank account only for medical expenses therefore it means any kind of medical expenses you do

Not have to pay taxes for this is a pretty good advantage so let’s look at what the requirements of an hsa account is over here the contribution limit for a single person is $3,400 this is three thousand four hundred dollars more than the eighteen thousand you can’t contribute to a 401 k which is on top of that so this is really good you can kind of hide your

Money more in more tax deferred type of accounts if you’re contributing to your family which is really for a dependent then you can contribute up to six thousand seven hundred fifty dollars if you’re 55 and older you can contribute $1,000 more in order to get an hsa account you have to sign up for an high deductible health plan through your employer which means

It does have and heidi which means you have to be a healthy young adult because if you have a high deductible it just means you don’t really plan on using the medical facilities all that much and therefore your employer can pay into it you just kind of keep the money rather than spend it on actual medical monthly fees so it’s a requirement that you sign up for a

High deductible health plan which may or may not be good depending on your health situation if you do sign up for a high deductible health plan you have to have a minimum deductible of $1,300 for an individual and $2,600 for family one plus one the out-of-pocket maximum for the year is pretty high $6,500 but if you’re anticipating that you don’t really need to use

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It then you know out-of-pocket maximum isn’t that big a deal plus if you save up for a few years you can easily pay for all this with your high deductible health savings plan the thing different between an hsa and 401k in an hsa you can actually withdraw from it as long as their medical expenses before you retire so right now i can withdraw from it and pay for my

Dental pay for vision or whatever and it would be tax-free money that i’m spending it’s kind of like an fsa flexible spending account except it doesn’t expire every single year so really you should leave this money in there and only use it for medical expenses but if you withdraw it you’re going to have to pay income taxes on it because you never paid any in when

You’re putting the money in right because it’s tax-free so when you take it out you have to pay taxes whatever tax bracket you are and a 20% penalty right here 401k only does 10% penalty but this is okay as long as you pay for medical expenses with your hsa account generally after you start an hsa plan after you collect it enough maybe $1,000 or more then you can

Start to invest it you can take the money out from your hsa put it in an investment account and you can let that grow so hsa is just not a kind of like a savings account where you only put cash in there and you only collect interest you can actually take this money and put it in a stock thing a fund you know you can invest this money actually now we might wonder

What the heck qualifies as medical expensive you look at this list is pretty broad everything that has to do with your body is included so let’s just check it out it includes everything you need to pay at the dentist at the optometrist your prescription doctor visits hearing aids and the battery that you have to pay for it can be tax-free the non cosmetic surgery

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Which could be very expensive and it will be great if you put a lot of tax-free money and compound it over the years and you’re paying your surgery with this compounded money acupuncture can be paid with tax-free money physical therapy alcohol drug smoke treatments man this is a really wide list this is of course not an exhaustive list but you get the point that’s

A lot of medical stuff so what’s the lesson learned here you may actually be signed up for a high-tech deliverable health plan already but you may not be contributing all that much so now you can rest easy that you can just max it out pick it to the maximum three thousand four hundred dollars i need to mention that your employer may actually put some money in for

You so you only need to make up the difference all the way up to three thousand four hundred dollars now you can actually reduce your total taxable income by yet another three thousand four hundred dollars which savion taxes so that’s all for today i hope this video helps you reduce the amount of taxes you have to pay i hope you kind of streamline your investment

That counts as well don’t forget to give me a like on this video comment down below let me know if you already maxed out your hsa as always you can contribute to my channel through my audible link down in the video description below where you can get a free book you can also do it directly through my patreon link over here and don’t forget to subscribe thanks for watching

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Why Max Out Your HSA | BeatTheBush By BeatTheBush

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