The ABC’s of HSAs

Aaron Evans, CFA

Senior Advisor, Aaron Evans, gives us the abc’s of HSAs (Health Savings Accounts)

About HSAs

HSA stands for Health Savings Account, which is a special account used to save funds for qualified medical expenses using pre-tax dollars. These expenses can include health insurance deductibles, co-pays, prescriptions, doctors’ appointments, over-the-counter meds, and many others.
Additionally, HSA funds not used for medical expenses can be used to supplement retirement savings after reaching age 65.
Authorized banks or custodians house HSAs, where funds can be invested in cash, CDs, stocks, bonds, or managed funds. There is no borrowing or pledging allowed, and typically a certain cash threshold must be met before excess funds can be invested.

Benefits of HSAs

In a world of rising costs and healthcare expenses (both now and in retirement) HSAs allow those eligible to save in a tax-efficient manner.
HSA Funds are “triple tax-advantaged”:
- Contributions go in pre-tax.
- Earnings and interest are tax-free if used for qualified expenses and tax-deferred if used to supplement retirement.
- Distributions are tax-free for qualified expenses and taxed as income if used for retirement.
Unused HSA funds accumulate for your lifetime and pass to your heirs.
HSA owners have complete ownership of their accounts and they are portable from bank to bank.

Contributions to HSAs

Those eligible to open and fund an HSA must be a participant in a high deductible health care plan (HDHP) as defined by the IRS and have no other medical coverage, including Medicare. You must also not be named a dependent on someone else’s tax return.
For 2022 a single HDHP participant can contribute up to $3,650 while a family can contribute up to $7,300.
Contribution limits are set to increase to $3,850 and $7,750 respectively in 2023.
HSA owners age 55 or older can contribute an additional “Catch-up” amount of $1,000 annually.
HSAs allow for a once-per-lifetime rollover from an IRA or Roth to HSA. These contributions are not deductible and are subject to contribution limits.

HSA’s can be a powerful healthcare, retirement and tax planning tool with multiple potential advantages. As each person’s eligibility, goals and financial situation may vary, it is best to consult a financial advisor and tax professional to see if an HSA makes sense for you.

Original content provided by Aaron R. Evans, CFA, CFP^® a Senior Advisor at Strategic Financial Services.

This material does not constitute the advice or recommendation of Strategic Financial services, and should not be used as the basis upon which to make investment or financial decisions The content is developed from sources believed to be providing accurate information. Information presented is for educational purposes only and is not intended as tax or legal advice.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on total client assets of over $2 billion.

Overview

Disclosures

Strategic Financial Services, Inc. is registered with the Securities and Exchange Commission (SEC) as an Investment Advisor. The term “registered” signifies compliance with regulatory requirements and does not imply a certain level of skill or training.

The information provided on our website, including weekly market commentaries, financial planning articles, and other educational resources, is intended solely for educational purposes. It is designed to offer insights into financial planning and investment management, aiming to enhance understanding of financial concepts, strategies, and market trends. This content should not be interpreted as personalized investment advice or a recommendation for any specific strategy, financial planning approach, or investment product. Financial decisions are deeply personal and should be made considering the individual’s specific circumstances, goals, and risk tolerance. We recommend consulting with a professional financial advisor for personalized advice.

Please be aware that Strategic Financial Services, Inc. does not provide legal or tax advice. The content on this website is not intended to be used as such or as a substitute for legal or tax advice from a licensed professional. We advise seeking guidance from qualified legal and tax advisors regarding these matters.
Investment Risks and Portfolio Management.

The discussion of any investments on this website is for illustrative purposes only and provides no guarantee that the advisor will make any investments with the same or similar characteristics as those presented. The investments identified and described herein do not represent all the investments purchased or sold for client accounts. The selection of representative investments to discuss is based on various factors, including recent company news or earnings releases.

It should not be assumed that any investments discussed were or will be profitable. All investments involve risk, including the potential loss of principal. There is no assurance that investments mentioned will remain in client accounts at the time you view this information.

When index returns are mentioned on this site, they are provided as a general indicator of market conditions and are not representative of any client’s portfolio performance. Indices are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly. Therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

While index returns are used as a framework to report on general market conditions, they should not be construed as an indicator of future performance of any specific investment or portfolio. Discussion of index returns is intended to provide context and insight, not to suggest that clients will achieve similar results. Each client’s portfolio is managed according to their specific investment goals and financial situation.

The opinions and any forward-looking statements expressed in the articles and videos featured in our resource center are as of the date of publication. These statements are based on current laws, regulations, market conditions, and other relevant factors, including third-party data. Given the dynamic nature of financial and regulatory environments, as well as potential changes in market conditions or economic circumstances, the information provided may become outdated or may no longer be accurate.
We rely on third-party data to form our opinions and projections, which means that these are subject to the same uncertainties that affect all data-dependent analyses. As such, we advise readers to exercise caution and not rely solely on the statements made herein for making financial decisions. It is recommended that investors consult with a professional advisor who can help assess the relevance and accuracy of the content in light of the current economic climate and personal financial situation.

Our website contains links to third-party websites as a convenience to our users. Strategic Financial Services, Inc. does not control, endorse, or guarantee the content found on such sites. We are not responsible for the accuracy, legality, or content of the external site or for that of subsequent links.
Contact the external site for answers to questions regarding its content.
The inclusion of any link does not imply our endorsement of the site, nor does it imply any association with its operators. Use of any such linked website is at the user’s own risk.