(800) 644-1150

The Triple Tax Benefits of Health Savings Accounts (HSAs)

Everyone who works with a financial advisor has different reasons for doing so. And one of the more common reasons for doing so is to receive tax management services. With that in mind, you need to pay special attention to this video, because you’re going to learn about one of the best tax-preferenced savings vehicles that’s available to you today.

If tax management is one of your primary financial concerns, the best and first place you might want to consider for tax-preferenced saving is a health savings account (HSA). An HSA is the only triple tax-free option available right now that gives you a tax deduction going in, tax-deferred growth along the way, and tax-free distributions on the back end. Keep in mind that the distributions must be used for qualified medical-related expenses, but it’s a good bet that virtually everyone will incur at least some medical costs in the future.

The key here to maximizing the HSA for savings is to pay all of your actual medical expenses as they occur out of pocket, while at the same time contributing to the HSA for FUTURE medical expenses. This allows the HSA the time to potentially grow tax-deferred and tax-free in order to leverage these benefits even more.

In this way, the HSA becomes a kind of supplemental retirement savings account where the money is earmarked for tax-free distribution of funds for your qualified medical expenses in retirement, including some long-term care expenses and insurance premiums. And once you establish your HSA, you can reimburse yourself on a tax-free basis for any IRS-qualified medical expenses you incur from that point forward directly from the HSA—even many years later.

Of course, an HSA is only permitted for those who already have a high-deductible health plan that satisfies minimum deductibles and maximum out-of-pocket costs. And you need to know that the sweet spot for HSAs, as they relate to retirement savings, is age 65 or older. If you withdraw funds at any age for qualified medical expenses, you’ll pay no taxes and no penalties. But if you take money out of the HSA for any other expenses, the withdrawals will be subject to taxation—and you’ll pay a 20%penalty if you’re under the age of 65. So yes, there are caveats.

An HSA is just the first of several ways that individuals and households can build tax-preferenced savings. We’ll tell you about the others in future videos, but if you don’t want to wait then you can call us here at Lucia Capital Group and we’ll be happy to tell you all about them.

Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

No client or prospective client should assume that the presentation (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from LCG or from any other investment professional.

This information is for educational purposes only and no tax payer shall use it for unlawful tax reporting.

Long Term Care coverage policies and provisions may not be available in all states. Approval may be subject to the terms and conditions of the insurance company. Insurance product guarantees are subject to the claims-paying ability of the issuing insurance company, and are subject to their terms and conditions. Insurance products offered through Lucia Securities, LLC (CA Insurance Lic. #0H40817)

Raymond J. Lucia Jr. is chairman of Lucia Capital Group, a registered investment advisor and CEO of its affiliated broker-dealer, Lucia Securities, LLC, member FINRA/SIPC. Advisory services offered through Lucia Capital Group. Securities offered through Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.

Start Your Strategy

Personalized investment advice and support to help grow your portfolio