"Health savings accounts hold your money - use it any way you want."
The above sentence is one of the biggest misconceptions people have about their HSAs. While it's true that these tax-free healthcare funds are portable, and don't have any "use-it-or-lose-it" provisions, the money is still set aside for qualified health purchases. This means they're subject to penalties for using them towards anything non-healthcare related until age 65.
And this doesn't just apply to those who have big shopping plans for their funds. Even those with more benevolent intentions are subject to penalties if you're not careful. So, how can you bequeath your funds to charity without losing the tax-free benefits? It's not easy, but there IS a way.
A quick refresher…
Like we mentioned above, even though HSA funds are technically your money, you can't just withdraw funds to donate them without being subject to a 20% penalty -- and that's on top of the income tax you'll pay for the trouble. Yes, even if you're trying to be charitable.
Unlike IRAs, which allow for qualified charitable distributions, any HSA funds sent directly to a charity are going to be considered part of your income, and levied accordingly. While it's still good to use your own money to help others, that's a large sum of money to pay on top of a donation.
Benefit others with your benefits
But one thing HSAs allow for is distribution to beneficiaries. You see, when you open an HSA, you're immediately asked to designate a beneficiary who will receive your funds in the event of your death. If the beneficiary is your spouse, they can keep the HSA active and use the funds for tax-free healthcare expenses, just as you did, even if they aren't currently enrolled in an HDHP.
Not bad. But even if your beneficiary isn't a spouse, the HSA ends upon your death. The beneficiary then receives a payout, which is subject to income tax like any other inheritance.
But you can change and add beneficiaries at any time during the life of your account. Keep in mind that many states require a spouse's consent before changing, though, so think this through before changing things up.
So, if you aren't planning to leave HSA funds to a spouse or family member, and you have charitable intentions, what are your options? (Stop me if you know where this is going…)
You can name a qualified charity as a beneficiary. Any entity other than the deceased's spouse or estate can be chosen. Like we mentioned above, in this situation the HSA would be dissolved, and the money given to the charity after being taxed. While this money is taxed as income (even if the charity is healthcare-related) it's a far more benevolent use of the funds than letting it sit in an estate for others to take.
Maybe the process isn't as easy as withdrawing and donating, tax-free. But considering the good that your funds can do for others, designating a charity as a beneficiary is a great way to ensure your savings doesn't disappear once you're gone. Instead, you can use your money to benefit others -- and if that isn't in line with the helping nature of HSAs, we're not sure what is.
We use most of our Learning Center articles to point out how health savings accounts (HSAs) are phenomenal tools for long-term savings for retirement. But that doesn't mean you shouldn't use your tax-free funds for something to ensure you're healthy and happy along the way.
While we usually reserve these articles for deeper topics, as we approach the end of the year, we couldn't resist sharing some of our favorite HSA-eligible, hi-tech spending opportunities. Because, while we'll always encourage you to save money for retirement, there's no reason you shouldn't also use these funds to improve your health and wellness today.
(Keep in mind, we're not tax or financial advisors and won't pretend to be. As always, our recommendations should not be considered tax or legal advice.)
When we say "big" we mean "BIG"
We're firm believers that if you're going to do this and have the available funds, you might want to go big. That's why we're recommending a few of our most popular bundles to bring you themed collections of the most-popular products in our inventory.
But this isn't just about grabbing big-ticket items. Common sense dictates that the more a product costs, the more tax savings you can get by using HSA funds. And that's why you should consider the Hi-Tech Bundle, which contains a number of cutting-edge healthcare products that you might not consider buying with out-of-pocket funds, but may come in handy for your health needs..
But without the tax? They probably seem a lot more appealing -- especially if it's something that will dramatically improve the quality of your day-to-day wellness.
The hi-tech bundle contains items that represent the latest technology in consumer health, featuring smartphone compatibility, and new ways to monitor, prevent and treat health concerns throughout the body.
Going "big" for those who are a little smaller...
For those looking to be the most advanced parents at the playdate, the Hi-Tech Baby Bundle comes with items that ensure you're always on top of your child's health. Today, hi-tech products like baby movement monitors and connected measurement devices give new parents unprecedented insights.
In other words, there was nothing wrong with the old-fashioned thermometer for staying on top of common baby health issues. But any opportunity to make things a little easier for parents is likely worth it. And with tax-free savings, it's even easier to take the plunge.
But, why should I spend?
The short answer to this (even shorter) question is "Because of tax-free savings!" And that's a pretty spot-on assessment of why you should consider allocating some funds for these purposes.
We understand the concern about dipping into a retirement plan for everyday items. And yeah, maybe buying bandages and cold relief products each month doesn't represent the most forward-thinking use of these funds. But when it comes to maintaining and improving health, any item -- big or small -- is worth considering if you don't want to spend out-of-pocket money. Not to mention, the more you set aside for these expenses that you'll incur regardless, the more you save on taxes throughout the year.
(And now that we're approaching the holidays, this is an even bigger concern to consider.)
The bottom line is that HSA funds are designed to help you maintain a healthy lifestyle now, and into the future. How you use them is entirely up to you. But, given the potential tax savings on these hi-tech bundles, and how much they can benefit users, we stand behind these recommendations.
Have you seen our new look? The web's most user-friendly place to shop for HSA-eligible products is now better... and better-looking!
Stay tuned over the next few days for more highlights of our exciting new website!
Welcome to the Episode 4 of Podcast: Eligible! This month, we're going into detail about how you can use your FSA and HSA dollars to keep the flu at bay, and help you make it through the worst of your symptoms.
We also have a few personal stories that may just spur you to take action for your health ... or at least convince you to never ride the subway ever again. Don't miss it!
And for more information about the flu and your tax-free funds, check out these articles from our Learning Center:
We enjoyed summer as much as anyone, but that morning chill in the air means one thing -- cold and flu season is here. With countless public health initiatives and medical professionals advocating for this important step, you may wonder how a shot can protect against a seasonal illness in the first place.
What many people don't know is that the flu vaccine is different each year, but protects against the flu virus through the same process since immunizations were invented.
A little background
People originally believed that the flu was caused by a bacterial infection. But after the initial flu outbreak subsided, the UK's Medical Research Council funded a sustained campaign that actually showed it was a virus.
We know, it's not exactly a pleasant story, but it gets better. These groundbreaking findings led to the development of the first flu vaccine in 1938 by Thomas Francis and Jonas Salk, who was also the father of the polio vaccine. These rudimentary vaccines were first used to immunize American soldiers during World War II.
So why do you need a flu shot every year?
There are plenty of differing thoughts on this, and you should always consult with your doctor before getting any vaccines. But most medical professionals agree it's important to get an annual flu shot, because these vaccines are one of the only immunizations that are continually updated. Influenza is a rare virus that changes and evolves, sometimes within the same flu season!
According to the U.S. Centers for Disease Control and Prevention (CDC), flu shots work by introducing new strains into the body, so the body's immune response can produce antibodies to ward off the infection. It takes about two weeks for these antibodies to form, which is why it's so important to get your flu shot early each season.
This past year, the CDC recommended the use of injectable flu vaccines, as opposed to the nasal spray flu vaccine, which wasn't as effective against that strain of the virus.
Alternative vaccines are also available, which protect against the same viruses as the primary vaccine, with an additional B virus included.
If you're pregnant...
The U.S. Centers for Disease Control reports flu shots given during pregnancy can protect both the mother and her baby for several months after birth from flu. And, the CDC recommends that pregnant women should receive a flu shot no matter what pregnancy trimester they are in to protect against the illness.
There are also additional options for those 65 and older, so consult your doctor to find the best option for your age and current state of health.
Yes, we just wrote a mouthful. But be sure to bookmark the FSA Store and HSA Store Learning Centers, since we'll continue to post seasonal updates, to ensure you stay on top of the latest cold and flu information all year round.
Welcome to the third episode of Podcast-Eligible! This month, we're diving into open enrollment to help you make an informed decision when it's time to elect your benefits this fall. Be sure to hang around to the end - we have a special promo code to help you save on your favorite FSA- and HSA-eligible products!
Our podcast is always fact-checked by our compliance director, and she had a few comments we wanted to make clear to our listeners!
- Withdrawals from an HSA are still subject to income tax after age 65 for non-medical expenses. (But the 20% tax penalty is waived.)
- Our Eligibility Question of the Month was FSA-specific this month, but we should note that HSAs can pay for expenses incurred during a prior year as long as the account was open.
- Some benefits administrators MAY require a new prescription each year, but typically this is not as common.
Also, we mentioned a lot of links in this episode. Here they are:
- Open enrollment articles on the FSA Store Learning Center
- FSA Calculator
- HSA Tax Savings Calculator
- Future Balance Calculator
- Grace Period/Rollover/Run-Out Guide
Thanks for listening and we'll see you next month!
Summer isn't even over and across the country, people are already thinking about open enrollment for 2019 healthcare coverage. And with that comes decisions about which type of health plan is right for you.
Though we're fully onboard with people taking advantage of high-deductible health plans (HDHPs) -- not to mention the health savings accounts (HSAs) that usually come with them -- these decisions aren't easy, especially if your immediate healthcare future isn't certain.
HDHPs have plenty of outstanding benefits for those able to take advantage of them, but there are definitely some questions you should ask before submitting those forms. Here are just a few.
Do you need to be pushed to spend money on healthcare?
HDHPs have a lot of advantages, with one of the biggest being the HSA. But HSAs are savings accounts, first and foremost. If you're the type of person who never typically goes to the doctor (beyond yearly check-ups) unless it's an emergency, an HDHP might make sense, because you'll be limiting your out-of-pocket spending.
But life isn't a straight line. And sometimes, things happen. With an HDHP, you'll have to pay medical costs on your own until you hit your predetermined deductible, but having an HSA can help offset those costs with tax-free funds.
In other words, if you have an HSA with your HDHP, and are treating it as an emergency fund or a retirement account, it might make more sense to lower your premiums, pocket your money, and turn to your savings when you need medical care most.
Have any medical costs in the coming year?
No one can predict the future, but if you're relatively healthy and not anticipating any major medical needs, an HDHP is likely a less-expensive choice. And if you have an HSA with your HDHP, the money you set aside during the year will remain in the account for you to use in a future year.
Have very high medical costs in the future?
Sometimes, we have options when it comes to healthcare, like putting off a non-urgent medical procedure. If that's in your not-so-distant future, an HDHP might be a good option, simply because it will allow you to set aside more tax-free money in an HSA to cover your medical costs.
With an HSA in 2019, you can put aside $3,500 if you have HDHP coverage for yourself, and $7,000 if you have family coverage. If you're age 55 or up, you can add an extra $1,000 to those limits. And the money in your HSA can grow over time, in case you decide to postpone the treatment even further.
Other health plans might offer lower deductibles, but you might be limited in what's covered by the primary plan, and you won't have tax-free HSA funds to fall back on to cover these expenses.
Are you comfortable with a high deductible?
After all the above questions, this is probably the most important. HDHPs require you to be a little more diligent with your available funds. And you'll need to pay medical costs promptly, so they will be credited against your deductible, allowing you to fulfill that responsibility more efficiently.
On the positive side, having this responsibility will promote better, more frugal decision-making about your health spending. Because it's coming out of pocket, you'll be encouraged to "shop around" and find better deals without sacrificing the quality of your treatment. If you're already of this mindset, then there's no reason to dismiss HDHPs because of the deductibles.
But if you have a bank account that "ebbs and flows" a little more often than you'd like, speak with a financial advisor before making a decision about an HDHP.
Our HSA Store learning series is back with another video! This week, Ijeoma Iruke, our Consumer Education Specialist, answers one of the most-common questions we get from our readers -- "Who decides what's FSA- and HSA-eligible?"
Plus, we also cover why products and services are eligible, so you can be sure your expenses qualify before you make a purchase.
Real-world spending and saving tips to maximize your tax-free funds -- HSAstore.com is health savings, simplified.
We've launched our very first podcast! Podcast-Eligible is focused on staying healthy and saving money with an FSA or HSA. Each month we'll tackle a different topic to help you with your tax-free healthcare accounts.
In each episode, our own Sean Hanft and Kevin Olitan cover a new FSA/HSA subject, answer our "Eligibility Question of the Month," and bring on special guests so you can better understand your benefits.
Check out our debut episode below!
We're happy to announce that HSAstore.com is now on YouTube! In these quick and helpful clips, Ijeoma Iruke, our amazing Consumer Education Specialist, walks you through the basics of health savings accounts, so you can make smart decisions about your healthcare spending and investment.
Real-world spending and saving tips to maximize your tax-free funds -- HSAstore.com is health savings, simplified. Subscribe to our YouTube channel to get all our video updates.
You've heard this before -- walking is really good for you. Whether you're not into running, recovering from an injury, or just getting back into exercising, walking is the ultimate lower-impact way to reduce your risk of high blood pressure, diabetes and heart disease.
Why not document all this progress with a fitness tracker? These devices recognize your body's movements and turn that information into data. It's simple...you take your steps, and the device makes sure your steps are counted, distance is logged, and burned calories are tracked. Some higher-end trackers can even record heart rates and sleep cycles.
But the best part? They keep you accountable for your own personal fitness goals, and do a good job of motivating you to stay with it. Try to beat a personal best.. Compete with friends for "high scores" (maybe not on the heart rate). Calculate how many hundreds of miles you've already covered. Whatever works best to keep you motivated… and moving.
Now, to be clear, fitness trackers aren't usually HSA-eligible. But, in some cases, they can be. And it's worth the effort to find out.
The secret number
Ten thousand -- this is the magic number. I'm sure you've heard it before. 10,000 steps a day is the standard goal for anyone tracking their steps. But why?
The number didn't come from a recent study, but actually from Japan in the 1960s, when the manpo-kei pedometer became an overnight sensation, selling out in stores nationwide. In English, "manpo-kei" translates to "10,000 steps meter."
After these Japanese pedometers became such a hit, research began to see if people should actually be taking 10,000 steps a day. Since then, scientists and studies alike have shown that 10,000 steps is a pretty good number to target.
Why a fitness tracker?
Fitness trackers aren't just helpful for keeping track of your exercise when you're out and about during warm summer months, but they help keep you engaged in your physical activity.
Having a goal of 10,000 steps a day is no trying task, but rather a fun and interactive way to get moving. In fact, a study published in the American Journal of Preventive Medicine said that women with fitness trackers exercised, on average, 38 minutes more per week than those using standard pedometers.
While this may not seem like much, you're logging a lot of miles by doing an extra 38 minutes. Trust us. And if you don't trust us, then trust the fitness tracker.
How to get walking
Sometimes the hardest part about doing something is starting it. Having a goal of 10,000 steps a day may seem steep at first, but don't worry--you can work your way up. Aim for 5,000 steps a day at first if you're not used to walking a ton, and from there keep on going.
In our own lives, we've learned to sneak in some steps in our daily routines. Here are some of the more-common tricks we use:
- Take a five-minute break every hour at work to avoid sitting for too long.
- Park your car down the block to add a few extra steps to your morning routine.
- Have a nighttime stroll around the block.
- Go shopping (it's more walking than you might think.)
Of course, this is the HSA Inside Scoop, so you're probably wondering about HSA eligibility. Using tax-free funds for a fitness tracker isn't common (because they're almost always ineligible).
But there could be limited instances where items like fitness trackers can become eligible, if a qualified medical professional says it's needed for your well-being (talk with your HSA administrator or a tax professional if you plan to use your HSA this way).
It's summer - close the laptop (after you're done reading our articles, of course) and head outdoors. You might surprise yourself with how easy it is to hit those 10,000 steps… and how much better you'll feel as a result.
Contract work, freelancing, moonlighting, solopreneurship -- no matter what you call it, we're living in a true "gig economy." The current work climate sees more and more people choosing to leave traditional workplaces and pursue self-employment, because of the freedom they have to choose their workload, set their own hours, and maybe even add a little more variety to their chosen profession.
Plus, with the exponential growth of connectivity, it's easier than ever to stay connected to companies and clients without ever changing out of your bathrobe. (Well, you might want to consider something a little nicer for those video calls.)
Most importantly, this increased focus on contract work, remote employment means workers have a wealth of new career options, while companies can hire the right people for their needs… not just the right people nearby.
That sounds great - what's the concern?
Plainly speaking, not having a full-time employer means dealing with an increasingly competitive freelance arena, and the lack of security and stability that comes with it. While there are plenty of health insurance options available to gig workers, the medical and retirement benefits that come with a full-time, salaried role are still -- by and large -- better for the employee.
Given these challenges, for many people making the leap to self-employment ensuring they're covered by health insurance might not be a top concern while sorting out the cost-benefit analysis of leaving the traditional workforce for the gig economy.
But if you're an HSA owner, you can breathe a little easier when venturing into the independent workforce. If you had an HSA with a previous employer, you can make the leap to independent employment with money already saved for healthcare needs. It might not be ideal, but it's your money to use for medical costs as you see fit.
What if I don't already have an HSA?
Even if you don't have an HSA from a prior full-time role, an HSA is a very attractive, attainable option when sorting out the health insurance landscape as an independent worker.
To qualify for an HSA you have to be enrolled in a high-deductible health plan (HDHP), not enrolled in any other medical coverage (such as Medicare), and can't be claimed as a dependent on someone else's tax return.
What makes this combination attractive is that HDHPs generally have less-expensive monthly premiums than more traditional plans – something price-conscious freelancers will appreciate. In turn, the HSA is building a reliable savings fund for use whenever needed. For the self-employed this means more of their money is going into the savings account and less toward monthly premiums.
Not only is the upfront cost lower, but this high-deductible, low-premium pairing can encourage a little bit of frugality with your medical spending. In other words, if your deductible is high, then you might not run to the doctor every time you have a cold. Plus, the set deductible protects you from the financial burden of big medical bills, should something more serious happen.
Finally, your HSA funds operate similarly to an IRA, in that you can invest the money in outside investments, like mutual funds or bonds, while the earnings remain tax-free, as long as you use the money to pay for legitimate medical expenses.
A little tax talk
Freelancers often work to reduce their taxable income by as much as possible each year through deductions, expenses and even end-of-year capital expenditures. An HSA can become part of a strategy to reduce taxable income while saving money for health expenses that can be used tax-free at any time.
For all other expenses, we encourage patience. Before age 65, tapping into an HSA for non-qualified withdrawals comes with a steep 20% penalty, plus that money becomes taxable. So you might want to hold off on that vacation. But once you turn 65, this money can be withdrawn penalty-free for any reason (income taxes apply).
Being 65 might seem far in the future for many freelancers, but putting money into an HSA that doesn't get spent on medical expenses eventually turns into a tax-free retirement savings account.
We understand that leaving the traditional workforce for contract work can be daunting. Gig workers can face the challenge of keeping up with multiple clients, tracking payments, and dealing with a more haphazard work schedule than even those who own small businesses.
But with an HSA as part of your healthcare and savings plan, your physical and financial well-being doesn't have to be a part of the stress, allowing you to enjoy the new levels of freedom and creativity offered by the growing gig economy.