HSA Headlines 10/19/18 - Why are HSA users spending more than saving?

The ever-rising cost of healthcare has been a common refrain in this column over the past year, and we have long advocated for the use of HSA funds on everyday health expenses to take advantage of these tax-free funds. But while many brokers may advertise HSAs as savings vehicles for retirement, the fact is, most people aren't using them that way.

This week we'll take a look at the larger idea of yearly HSA spending, as well as a unique tactic to fund your HSA for the future you may not have considered.

Forget the savings. Employees use HSAs as spending accounts - Margarida Correia, Employee Benefit Advisor

HSA investment assets continue to grow year over year, reaching $50 billion in funds according to the 2018 Mid-Year HSA report by Devenir. But, while HSA savings continues to grow nationwide, a large majority of HSA users are using their tax-free funds to cover medical expenses without much thought for the future.

In a survey of 2,155 employees conducted by the brokerage and advisory company, Willis Towers Watson, almost two in three workers (65%) are tapping their HSAs to pay for immediate healthcare expenses with only a modest 8% saving the money for the future. About one in four (27%) use the money only when necessary and save the rest, the survey found.

So what does this all mean? Seeing as HSAs are marketed by benefits administrators as retirement accounts, a staggering 65% of users paying for immediate medical expenses is a wakeup call. The vast majority of HSA users aren't funneling their money away - they're using it!

This could be a sign that consumer education around HSAs is still a major issue - if HSA users are spending but not saving, or vice versa, they could be missing out on additional benefits of these accounts.

Using an IRA to fund an HSA - Ed Slott, Investment News

Ever heard of a Qualified HSA Funding Distribution (QHFD)? What sounds like a lot of jargon is actually an interesting financial decision for those want to diversify their portfolios with an HSA. A QHFD is simply a direct transfer of funds from your IRA to your HSA.

But the catch is, you can only do this once in your lifetime. (No pressure.)

So why would you do this? For starters, it's a great way to kickstart an HSA, especially if you have an unexpected medical expense and don't have available funds. A QHFD allows you to move money into an HSA where it is not subject to taxes if used for qualifying medical expenses.

Maybe they aren't that well-known, but QHFDs could be a smart choice for some HSA users. As always, we're not financial advisors, so be sure to get advice from a certified tax or financial planner.

HSA Headlines is a weekly roundup of the latest, most relevant news and conversations about your health savings. It appears every Friday, exclusively on the HSA Learning Center. And for more about your physical and financial well-being, be sure to follow us on Facebook and Twitter.