Podcast Episode - Suze School: How an HSA Can Help You In Retirement

On this Suze School, we get a lesson about why, if you qualify, an HSA can help you with your medical expenses when you retire.

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Podcast Transcript:

March 3rd, 2024. Welcome everybody to the Women and Money podcast. As well as everybody smart enough to listen, Suze O, here and in just a few hours, Miss Travis and I will be on our way to the airport to make our way on a 15, almost 16 hour flight to Dubai. From Dubai, we drive to Abu Dhabi, which is about an hour drive and then we start our adventure for the next three or four days. So I have to tell you, I'm actually now at the point where I'm really, really excited, I'm excited to meet all of the extraordinary women that will be there. It combines two groups.

The event I'm going to, the 30 under 30 which happens to be 30 women who are under 30 that are changing this world and the 50 over 50 women, that I'm part of, that are changing this world. And together we talk and we mentor each other and I personally look forward to learning from the 30 under 30 as to all the things that they're doing online and these incredible companies that they've established and I'm really, really looking forward to it. I'm over my fear.

I have become the warrior that I was born to be and I will take my place on that stage and I will be once again one of the foremost speakers to have been born. That's how I think about it, but today happens to be Suze School.

And so a few things that I want to say before I even begin Suze School. However, number one, let's talk about Alliant Credit Union and the rates on their certificates of deposits. Now, I know I told you that the rates on the 12 to 17 month certificate of deposit is not going to go down or at least not that I know of.

The rate on the 18 to 23 month certificate of deposit on March 1st did go down, it went down to 5% and for those amounts of $75,000 or more, it is at 5.05%. But that is why I've been telling all of you take advantage of the 12 to 17 month certificate of deposit at Alliant Credit Union where when you apply for it, go for 17 months because it's actually 17 months and 30 days and your rate would be 5.4% or for amounts of $75,000 or more. It would be 5.45% and that's 0.4% more than what you would get if you did an 18 month certificate of deposit. So therefore, if you're interested, go to my, my Alliant alliant.com and take advantage of the 12 to 17 month. Again, you have to tell them if it's more than 12 months, you have to talk to them about it.

But take advantage of that while those rates are still in effect.

Next a while ago, I think it was January 7th. I went on this podcast and I gave all of you seven exchange traded funds that I would buy that day, that day. Actually, that next day, Monday, if all I had was $1000 to invest, because that was the question I was asked about. If I had $1000 to invest, what would I buy? And I said I would buy one share of this, one share of that, one share of that. I give you the exact prices, everything and it totaled exactly $1000 for those seven exchange traded funds.

The other day I posted on the Women and Money app. And if you don't have the Women and Money app, you are seriously missing out. You should download it on Apple Apps or Google Play. It is free. Because it is on that app that I really do communicate at least on Sundays. Not today though, not next Sunday, but after I've done a podcast. I go there and I look at what people are saying, the ones that get up, they listen to the podcast early, they have questions and I tend to answer them and I do all kinds of things on the community app. I share personal footage of the island or what I'm doing my chickens, but things that I really don't do anywhere else.

But the other day I posted the actual returns, those seven ETFs have given us over the past almost two months and they've all done really, really well, you can go on the community app and take a look at them. But many people at that time said, wait, wait, I didn't listen, I didn't do it. Is it too late? What should I do now? What do you think, Suze da da da?

No, when I say something on the podcast and I say it on a specific date, which is why I start every single podcast with the date that I am saying something. I mean it for that date, I don't mean it for six months from now, one year from now necessarily. I meant it for them because with these markets a lot can happen in a very short period of time. So I just wanna say that to all of you

In the past recently, you have heard me mention HSAs and HSA is a health savings account.

And many of you have heard me say it's one of the best retirement accounts out there

and now you're confused because it's like Suze, I thought it's a health savings account. So, how does a health savings account, what does that have to do with a retirement account? And then you're writing me all of these questions and all of these emails. And henceforth, we are going to Suze School on HSAs. So, you really need to get out your Suze notebook. I'll give you a second to do that.

Ok. All right. So wonder did I pack the right clothes?

I hope so. At first I thought it was gonna be hot there and now I hear it's gonna be kind of cool and it's like, oh, ok. We'll see what happens. Oh, are you back? Are you ready for this? Ok.

At first most of you a long time ago, if you had health insurance plans, they were known as PPOs or Preferred Provider Organizations and they were fabulous. And then we started to have HMOs, wh were a health maintenance organizations that worked a little bit less efficiently in terms of being able to select any doctor you wanted to be able to, as you could with a PPO.

And then we had something known as an EPO, which was an Exclusive Provider organization and all kinds of things. A POS which was the point of service plan and on and on and on

And then emerged a new type of health insurance that originally in my opinion emerged for most health insurance plans, especially the PPOs got too expensive for employers to be able to fund really for their employees. So the next thing that emerged was something called an HDHP.

And those four initials stand for a High Deductible Health plan.

And a high Deductible health plan is where there is a very high deductible. So you pay a lot out of your own pocket before it goes into effect.

And for a high deductible health plan, the premiums are usually lower than let's say on a PPO. You need to know that number one, number two, High Deductible Health Plans also come with something known as an HSA. A health savings account and the health savings account is an account where you get to fund it with money. You have never paid taxes on.

And the reason that you get to fund it with money you have never paid taxes on is that is where the money comes from tax free. When you take it out to pay the high deductible part of the High Deductible Health plan. Did that make sense? So you have a high deductible Health plan where the premiums are a lot lower than other types of health plans.

And you fund it through a health savings account and again, a health savings account, you fund with money you have never paid taxes on. It gets to stay in there and grow tax-free. And when you go to take it out and use it for a qualified medical expense, it also is tax free.

So many, many people think. And I'm one of them that in many cases, a health savings account is probably when used correctly is one of the best retirement accounts out there because you get a tax deduction when you put the money in and when you go to take it out for a qualified medical expense, it is tax free and it covers almost absolutely everything except certain dental services. All right. And a few other things, but there's really very little on there that it will not pay for. Now with that said, a health savings account truthfully is for health needs. It does not replace your retirement accounts. It does not replace your 401k or your 403b or your TSP. It does not replace a Roth IRA. So just know that it works in conjunction with those retirement accounts.

Next, I want you to write down maximum contribution the maximum contribution and I want you to write down for 2024.

The maximum contribution that you can put into a health savings account with pre tax dollars is if it is a health savings account for just you, the maximum contribution can only be $4150.

If you have a family plan, the maximum contribution that you can put in for 2024 is $8300.

You have to know those maximum contributions because you cannot put in any more than that. Those are the max contributions for 2024 unless you are 55 years of age or older. And then you can put in an extra $1000. So there is $1000 catch up for those who are 55 or older.

When you put money in there. And a lot of times, by the way, if you have an employer plan, this is something that your employer wants you to do. There are many companies that actually give you a tax free contribution at the very beginning of the year to help you fund your HSA.

But please take in mind the maximum contribution that can go into an HSA includes whatever your employer may put in there as well. So you have to take their contribution into your HSA if they make one as part of the total max contribution for the year.

And it's important that you have money in your HSA because what you have to understand is that the High Deductible Health plan that comes with an HSA, when you use it, they have a minimum annual deductible.

Now, do you know how on many of your car insurances or whatever it is you have deductibles and the lower your deductible, the higher your premium, the higher the deductible, the lower your premium.

And that is exactly the same concept of how an HSA with a high deductible health plan works. With an high deductible health plan, the minimum deductible and notice that I said minimum is 1600 for a single 3200. This is for 2024 for a family plan.

Now, if the company wants to, they can make that minimum deductible higher than that, but it cannot be lower than that. Just be aware of it.

Next, I want you to write down maximum out of pocket. What this means is that no matter what happens to you, the maximum that you will ever be out of pocket, meaning you will never ever, ever have to pay more than this amount for some health care service or qualified medical expense. So for the year 2024 for a single, that is $8050 and for a family plan, it's $16,100. Do you see if you listen to these amounts that I just gave you? Do you see why they call it a high deductible health plan?

So those are the terms that you really need to know. Now, I'm gonna talk about this a little bit more, but not everybody should have a high deductible health plan with an HSA. I personally love them and I think they are fabulous, but not all of you, number one are qualified and I'll tell you about that in a second.

And number two, a lot of you don't have the money to be able to do so you have to know and use a calculator and decide and answer a few questions. If in fact, an HDHP with an HSA is something that meets your needs when it comes to a health plan.

Even though I know that those numbers sound large again, I urge all of you to at least think about it because there are many, many circumstances where it absolutely makes sense, especially if you happen to have some disposable income.

Now, when you start an HDHP and you want to fund your HSA, can you imagine KT in this podcast right now? Anyway, one way that you can do it is if you have money in an IRA, a traditional IRA you can do once in your lifetime, a roll over from your IRA into your HSA account.

So now you're going from an IRA that if you took the money out for any reason, it would be taxable.

But here, if you took it and did an IRA rollover with it and put it into your HSA and used it for a qualified medical expense, now, it's tax free. I want you to think about that. There are many of you out there that have 401k plans from ex employers.

You cannot roll money from a 401k, for instance, into an HSA , they only allow it once but it has to come from an IRA.

So for those of you out there who might be interested in a high deductible health plan with a health savings account and you happen to have money in an ex-employer 401k plan, you could do an IRA rollover with that and then you would be allowed

to do an IRA rollover into your HSA but only up to the point of the maximum contribution for your situation.

So if you happen to do a 401k IRA rollover or you have a traditional IRA and you have $10,000 in it. Let's say you cannot roll over $10,000 into your HSA .

You can only roll over up to the maximum that is allowed in the HSA. So if there's nothing in there, you don't have an employer, match an employer contribution, nothing and you're single and you're under the age of 55 you could roll over up to 4150 for a family plan. In that same situation, you could roll over $8300.

So when you take your money in an IRA and you roll it over to an HSA that is known as a qualified funding distribution.

But you can only do that, listen closely to me, if you are enrolled in an HDHP - a High Deductible Health plan and you have to remain enrolled for at least 12 months. So they're not gonna let you just roll it over. Now it's in your HSA then you drop everything and think that you can get away without having to pay taxes on it. No, you can not do it that way. So just beware as time goes on when more and more money is building up in your HSA or many of you may find that you have a lot of disposable income and you wanna pay for your medical expenses out of your own pocket while you are saving the money that happens to be in the HSA. So it can build up and up and up tax free.

So then in either case, you will have the ability to not just leave the money sitting there to pay your deductible or pay the max out of pocket expense.

You now have the ability to invest that money with the investment choices which your HSA firm is offering you.

So now you're investing money. You've never paid taxes on. It's growing, it's in a Standard and Poor's 500 index fund or whatever they may be offering you. And now it's growing and growing and growing and as time goes on, maybe you haven't been ill, maybe you didn't need to use money. You get to put more and more money in that investment account and now you have 50 $100,000 in there. Not impossible.

You can use that money anytime you want for a qualified medical expense. But let's say, all right, you're now 65 years of age and now you've retired and now something's come up and you want to use some of the money that's in your HSA but you don't want to use it for a qualified medical expense. Maybe you want to use it for a down payment on a car or whatever it may be.

Now, what happens is you get to take the money out without any penalty whatsoever.

However, now you will pay ordinary income tax on it, but that's not such a big deal because that's almost exactly like in traditional IRA or traditional 401k. The only real difference is that in an IRA or 401k, once you're 59.5, you can take the money out without any penalty whatsoever and pay tax on it. Then when you're in an HSA. you have to be 65 or older to take it out without a 20% penalty and then you will, like I said, pay ordinary income tax on it if it is used for a non-qualified medical expense.

Are you understanding how it is just possible given the amount of money that we spend when it comes to our health needs in retirement? Oh, my God. Can you imagine putting money in and getting a tax write off for it and using it tax free? There is not one other retirement account that offers that benefit.

But I just want to reiterate one more time that an HDHP with an HSA is not to replace your other retirement accounts. There are many other benefits that a Roth IRA has or a 401k or 403b or a TSP, especially if it's a Roth at work, especially if they match your contributions. So do not think that this... an HSA is to replace other types of retirement accounts. It works in conjunction with them. So I do ask all of you to really think about it and consider it a true possibility if you are eligible for one.

One thing though, that's very important when you have an HSA, this is a type of an account that can go to your spouse for instance, and your spouse can take it over as her own or his own HSA. So your beneficiaries can come to play big time. If something happens to you before you have used it all up, you are not to ever make the following mistake if you have an HSA account and you have to fill out a beneficiary designation.

And let's say you also have a living revocable trust and you are married, even if your spouse is the sole beneficiary of your living, revocable trust.

If you put the trust as the primary beneficiary for an HSA on your death, everything that is in that HSA and it can be sizable, will automatically be put into your spouse's regular account and it will be 100% taxable to him or her. A trust is never, ever, ever to be a primary beneficiary of an HSA.

If you're married, your spouse is to be the primary beneficiary. Am I clear with that? It's very different for an IRA and other retirement accounts, especially if it's what's called a seer trust.

But even for other retirement accounts, if you are married in particular, your spouse has always got to be your primary beneficiary, because he or she will then be able to take it over as their own. I hope it's obvious that for many of you, I love HSAs. I wish I could have one.

But the reason that I can't have one is you cannot be enrolled in Medicare and have an HSA. Let's say however, that you're married and your spouse isn't covered by Medicare yet,

they can have an HSA and if you have a child, that child can be insured under that HSA with your spouse that is not on Medicare. All right, you have to not be eligible to be claimed as a dependent on someone else's tax return. If you are, you can't have an HSA.

You can't be covered by other health insurance. If you are, you can't have an HSA. Obviously, you need a high deductible health plan but not any other type of health insurance and to have an HSA , you have to be covered by a high deductible health plan on the very first day of the month that you open up in HSA. So those are things that you need to know. And one more thing if you happen to be receiving right now benefits under Tricare under the VA or IHS benefits, you're in the armed forces, you cannot have an HSA either.

Now, there are additional reasons why you wouldn't be eligible for an HSA but I need you to check it out on your own. Otherwise this entire podcast would be possibly about that. But those things that I just listed are the main ones that you need to know.

Now the question becomes, where can you go and find out? Well, normally your employer will offer you one, you should check it out and see if it makes sense for you in your particular situation. If you are an individual, there are many, many, many companies that offer HSAs, one of them is called the HSA Bank.

You can go there and on their website, they actually have a calculator for you to put in certain facts and figures to see if an HSA makes any sense for you. I obviously am not being paid to say that they don't even know that I'm saying this, but that's another place that you might just want to check out, especially if you're an individual and you want an individual plan and you're not working for a company that offers one of these.

All right, everybody that is your Suze School for today. I can just see your heads a whirling around. I can hear you saying Suze, when are you going to stop giving us these Suze Schools about these rules and that rule and these things in our Suze notebooks are all full and now we have another five Suze notebooks that are just chock a block full. When are you gonna give us just an emotional spiritual, maybe nice little financial podcast?

I don't know, I kind of don't even plan it until I sit down and it comes out. Although I was thinking about doing a podcast on Financial Faith. Hm. That might just be one of the first Suze Schools I do when I come back.

All right. Everybody wish us well as we embark on our trip over to Abu Dhabi.

And when it comes to money, there's only one thing that I want you to remember. And it is this people first, then money, then things now you stay safe and you stay unstoppable.