Mind Blowing ways to Maximize Your Health Savings Account (HSA) | Jeff York | 98 - Catching Up to FI: Financial Independence for Late Starters

Episode Transcript
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(00:01):
Hey gang Catch up to FI listeners.
This is a special two part episode.
Number one, we are unveiling our mysteryman, Jeff York, who is the wealthy
custodian because he's an HSA expert.
We have HSA Maven, Jackie CumminsKoski, my co host on this, and I'm
just trying to keep up with them.

(00:21):
HSA is an important topic.
It really isn't outthere in our FI bubble.
And we went long on this one.
This is a comprehensive episode.
It's going to be in two parts.
Today we're going to talk about tips,tricks, and misnomers of the HSA.
And then part two will be questionsanswered from the audience.

(00:43):
So here we go.
I'm over two hundred thousanddollars now just from doing that
for 12 years doing the familymax, so it'd be over two hundred
thousand dollars, more than likely.
What,
Just one comment.
Jackie, you could do somethingthat I couldn't do in 2008.
Invest.
Remember, the world is blowing up.
Yes.
So you had the stockmarket wins to your back.

(01:06):
I did.
I had the
sales.
Yes, you're right.
I'm not putting you down, I'mjust saying that No, you're
right.
A lot of your growth, I saw yourchart, I think like 56% growth.
Yeah,
only 8 percent of HSA accountshave a portion invested, only 8%.
So the majority of people arenot investing in their HSA.

(01:29):
And so this is the big difference here.
That's a shocking number, really.
And I guess that 8 percentis the FIRE community.
Yeah, I was about to say, the 8percent is the FIRE community.
And the funny thing is I'vebeen tracking this for, I would
say, probably the last 10 years.
So about 5 or 6 yearsago, it was only like 4%.
It was even smaller.

(01:50):
So were talking about this justto make sure everyone knows
that you can invest in your HSA.
your body is just like any otheruse asset, like a car or a house.
It wears out no matter what you doand how well you take care of it.
And I know as sure as the sun's goingto rise tomorrow, I will be needing
healthcare when I'm in my eighties.

(02:11):
So you're looking at it as like selffunding your long term care insurance.
Right.
You got it.
You got it.
But I've been told by otherfinancial planners, don't use
the HSA for long term care.
Go for you.
What is it on the taxes?
If you're adjusted, if you spend 7.
5 percent on health care, youcan get a deduction basically

(03:00):
Welcome to Catching Up to FI Iam Jackie Cummings Koski, and
I'm here with my co host, BillYount Bill, how you doing today?
I'm doing awesome.
We got a special episode today becausewe don't know that anybody's done one
like this, and we have two expertson the topic, so I'm going to sit
back, relax, and let you guys havethe spotlight because you guys are

(03:22):
the mavens, the gurus, and we hopethis really not only entertains our
audience, but gives them informationthey might not have had before.
Yeah, that's right, Bill.
And I think as we were preparing forthis, you even said you picked up a few
things and we're just continuous learners.
So today we are going to talk allabout health savings accounts,
HSAs, and we're going to talk about,who's it for how the HSA eligible

(03:46):
and high deductible plans work.
We're going to talk aboutaccumulation in the HSAs.
We're going to talk about managingthem, investing them, and then finally
drawdowns and estate planning issues.
So we're going to go from A toZ, but before we do that, Bill,
you got a few shout outs for us.
Yeah, I sure do.
We'd like to have a review of the week, acharity of the week and a podcast shot out

(04:07):
of the week, sort of a new thing for us.
So the review of the week.
Comes from an anonymous person that said,I listened to a number of financial and
retirement podcasts and your by far isthe podcast that most resonates with me.
Thank you.
And please keep up the work.
Thank you for that.
That really does sort of warm our heartsand, give us the juice to keep on going.

(04:27):
And the charity of the week is special tome because it's the Grand Teton National
Park Foundation and the Teton Rangers,a good friend of mine, Jim Dolly, the
white coat investor had a, really badaccident while rock climbing and was
airlifted off the face of a mountain.
And these guys essentially saved his life.
So we encourage you to take alook at this charity and maybe

(04:49):
you want to donate as well.
Now, as far as the podcast shot ofthe week, we had Jesse Kramer on the
show recently, and you'll be hearingthis episode in the near future.
And he has a relatively new podcast calledthe best interest, and he takes complex
topics and distills them down to simple.
Bites.
So we really encourage you notonly to listen to us, but to add to

(05:11):
your queue Jesse Kramer's podcasts.
Okay, Jackie, why don't youintroduce or reintroduce our guests?
Yeah.
And, we love to share great stuffand we love to share the love.
So as we mentioned, we're going to talkall about HSAs health savings account.
Now to really do thisconversation justice.
We brought in our good friend andHSA genius, Jeff York, or better

(05:35):
known as the wealthy custodian.
Jeff was our guest on episode 74 and 76.
And we loved him so much that we justhad to bring him back on this topic
because he knows so much about it.
He's going to talk a lot about,the history of HSAs and obviously
his firsthand experience.
So in case you didn't catch him onthose shows here's just a quick recap.

(05:58):
He reached millionaire status, achievedfinancial independence and retired early.
But the jaw dropping fact is thathe did all this while working as a
public school custodian in California.
His highest income was just $21 an hour,which comes to about $44,000 a year.

(06:19):
So and if you're trying to do the mathand where that falls, basically, according
to the Federal Reserve, the medianhousehold income in America is around
$70,000 So he did it on a lot less.
So he's super modest when it comes towealth, but He loves to teach others and
he came on today to talk specificallyabout HSAs and we're excited to have him.

(06:44):
So Jeff, you're welcome to
the show.
Well, thanks for havingme on Jackie and Bill.
It's a real pleasure to be back.
Yeah.
Welcome back.
you're becoming a correspondenton the show because your breadth
of knowledge is extensive and I'msure there's other topics that
we'll have to bring you back for.
Yeah.
Well, I appreciate that.
Yeah, we got a lot of great feedback.
So before we kick it off, I thoughtthe three of us could maybe just talk

(07:08):
a little bit about how long you'vehad your HSA, how you use it and maybe
your provider and things like that.
So everybody kind of knowswhere we stand with that.
So bill, why don't you tell us howlong you've had your HSA and who
you're with and how do you use it?
Well, I've had it about 10 years.
I got going with it before I really wokeup because I was sort of forced into a

(07:28):
high deductible plan being an independentcontractor and, organizing my own policy.
And I found it very advantageous.
I use Fidelity.
I think all of us do.
And if you check out the Morningstararticle that we'll link into the
show notes Fidelity is probablyone of the premier plans that
people should consider using.
So I'm very happy with it.

(07:49):
I have, over a six figure, not over,but a six figure balance in it.
And, I invest it in one, total worldindex fund to maximize its growth.
So I'm a big fan, but in our hosts here,I am late to the game because the two
of you were on top of it much earlier.

(08:10):
I will tell a little bit about my HSA.
And I want Jeff to go last becausehis is the most impressive.
So Bill, I've had mine aroundthe same length of time as you.
Now, I currently do not have a highdeductible plan where I can contribute
to an HSA, but I started back in 2008.
So I contributed for about 12 years.
I guess I consider myself an earlyadapter, even though, again, Jeff

(08:32):
has spent a little bit longer.
I currently use Fidelity, but whenI was working, my company used
Optimum Health for the HSAs andmy HSA just crossed over $200,000.
So that's crazy.
So, and remember that I have not madeany contributions to that account for the

(08:57):
last five years since I've been retired.
So that's 12 years worth ofcontributions from me and my employer,
and those were family contributions.
So I do use it for long term vehiclewe'll talk a little bit more about
that and how others can use it.
But I have Fidelity as well.
And it's been working pretty good forme, but Jeff, I want to hear about

(09:19):
your HSA, how long you've had it, whoyou use and how's it going for you?
Well, I had mine startedmy HSA in early 2004.
We'll go back in history a little bit.
The HSA comes out of the Bushtwo presidency ownership society.
Take control of your health care.
So the reason why it was, I would sayattractive to me is at that time at the

(09:45):
school district, up until about 2000,I was on a top plan plan, a 100%, no
deductibles, no copays, no out of pocket.
The employer paid for it all, butin 2001, inflation reared its ugly
head in the healthcare industry.
And the premium startedto go through the roof.

(10:06):
So by the time 2003 came out, theywere taking about $250 a month
out of my paycheck over and abovewhat my employer was contributing.
And there was no high deductibleplan offered at the time.
So when you're making like $10an hour, $11 an hour, and you're
single, that kind of hurts.
So when the HSA and the high deductibleplan was first offered at my school

(10:32):
district, I jumped on it immediately.
And I implemented Moving on to the highdeductible plan, but at my employer there,
it was not an employer sponsored HSA.
I had to go out and find myown custodian and everything.
And at that time you No one reallyknew what an HSA was going to become.

(10:54):
And I invested mine inWisconsin called Green Bank.
And history serves me right.
It was just in a cash account.
And if I remember right,interest rates were still pretty
high back in the early 2000s.
And it was basically invested in cash.
So that's where it was.
And I think at the time, the most youcould put in as a single was $2,050.

(11:14):
I invested in that.
And in 2006, I would start callingVanguard off asking them if they
would start offering HSA, soI could use Vanguard products.
And in 2006, I got tied in withhealth savings administrators.
And at the time when I was moving my moneyfrom one custodian to them, they didn't

(11:36):
have any real good products at the time.
So I asked on the phone if they wouldoffer Vanguard products and Magically
within a few months, they had Vanguardproducts, but at that time they had
fees at like $45 a year account fee.
I think they were charging like 25or 30 basis points every quarter.

(11:58):
They would take it out ofyour account, health savings
administrators, and then you had them.
Expense ratio of the productyou're in on top of that.
And so anyways, I had them all theway up until 2019, until I was always
calling Fidelity saying, why don'tyou offer your own individual HSAs?
And then I moved it overto them at the end of 2019.

(12:21):
So up until about 2010, Imade steady contributions.
But from 2010 to 2018 I didn't makeany more contributions because you
got to remember I'm now single.
I'm now bought a house on $32,000 income.
And, when you're single, you're paying thefull freight of life, the carrying costs.
So I didn't do any morecontributions into the HSA till 2019.

(12:47):
and
my balance is about a $70,000 right now.
Yeah, that, that's awesome.
And I wanted us to kick it off thatway just to see how we're using it.
But certainly since we all saveand invest, that is not the
only way that you can do it.
So I want to go back tothe basics a little bit and
really just talk about who is.

(13:09):
A high deductible plan with an HSAfor so let me go ahead and just share.
If you're on YouTube, we're goingto share some slides and this entire
presentation is really the mostcomprehensive presentation and podcast
episode that you're going to get.
around HSA.

(13:30):
So we're going to providethat for everyone.
And if you're on YouTube, we'll showa few of those a few of these slides.
So right now I want to share
the basics of HSAs.
And Jeff, if I'm missinganything, let me know.
So you do have to be on anHSA eligible health plan.
And I purposely use the term HSA eligibleand not just high deductible plan

(13:52):
because not Every high deductible planmeets all the requirements for an HSA.
So just keep that in mind.
So they're almost use interchangeable,but they must meet all the requirements in
order to be able to contribute to the HSA.
So you do have to be on that plan.
So when it comes to.
Who should be on a high deductible plan?
Bill, what, what do you think?

(14:14):
Why did you choose an HSA and who doyou think a high deductible plan is
Well, I mean, I think it's reallygood for young people who are healthy
and for healthy people in general.
I mean, if you're a high consumerof health care and you have to
cash flow all your health careexpenses, it may not be for you.

(14:36):
And I think that's one of thethings you really got to look
at before you dive into this.
Yeah, and keep in mind that typicallyif you've got a high deductible, your
premiums are much lower, so consider that.
And then if it's a low deductible,typically the premiums are going
to be a lot higher, so you haveto look at that in aggregate.

(14:56):
And I will include a calculator thatwill help you determine, you can put
in certain factors and determine if,It's something that would work for you.
You can put in your information.
Jeff, what do you think?
who are the high deductible plansor the HSA eligible plans best for?
Well, I agree with Bill that if you'reyounger, you can leverage your age

(15:17):
and your health, your good healthand go on to a high deductible plan.
But just remember, if you're goingto make that commitment, you need to
have Money set aside in an emergencyfund if a worst case scenario.
I mean, if you're out of pocketmaximum for a single person is
7, 500 or 72, wherever you'reat, you better have that ready.

(15:39):
And if you need to go access thatmoney, You need to be ready to do it.
I've personally done it several timesin my life already on healthcare needs.
I have a sinking fund for that,for the deductible in particular.
And in order to cashflow things, sayyou go to the dentist and you got to,
like my wife who has dental issues,and you got a $3,000 crown, you gotta

(16:03):
be able to, take that on the chin.
And that's no, no pun intended, but, butyeah, so I guess that's another point
to say that, we'll talk a little bitmore about the HSA eligible expenses
or what you can spend that moneyon, but it does go beyond medical.
Like you can use it for dental.
You can use it for vision.
You can use it for hearingand things like that.

(16:25):
So those are just somethings to think about.
And obviously that syncing, I think.
Fun could very well be your HSA.
Like there's no one way to usethe HSA, even though we use it.
Ours are for long term and we invest it.
You can spend it downeach year if you want to.
And that's the beauty of it.
It's very flexible.
You can use it for tampons.
Yeah, you certainly can inwomen's, yeah, women's hygiene.

(16:47):
And the funny thing is youused to not be able to do that.
And that's why it's a big deal.
You would think these feminine hygieneproducts, yeah, you could always use it.
No, you, before you couldn't,but now you certainly can.
So yeah, we'll go through,some other qualified things
that we might not think about.
So let's take a look at other thingsthat you probably have heard about.

(17:08):
Is that it's triple tax savings.
So it's tax free going in,out, and while it grows.
And we'll go into that a little bit more.
And this is a little known fact, you guys.
A lot of people don't know that ifyou get your contributions through
payroll, you don't pay FICA tax.
That's Social Security and Medicare.

(17:28):
So that's a nice little plus.
Right?
So Jeff, have you ever had anybodyget confused about the HSA Health
Savings Account versus FlexibleSpending Account as far as the funds
rolling over from year to year?
Yeah, an individual that I'm mentoringright now, I was explaining that same,
that exact concept to her, what thedifference between a flexible spending

(17:51):
account and how you have to use it.
And if you don't, it goesback to the employer.
And with the HSA, you get tocarry it from year to year.
It's yours.
That's a big DifferenceI've tried to explain to the
individual.
Yeah, make sure you don'tget those two confused.
The keyword with health savingsaccount, the keyword is savings.
It's designed where you cansave it and roll it over with
a flexible spending account.

(18:12):
The keyword is spending,meaning it's designed to be
spent down every single year.
So that is an important distinction.
have both?
You can have both.
I actually have a slide thatkind of explains what, how
they could be compatible.
So you can possibly have both, butremember there's a bunch of different

(18:34):
types of flexible spending accounts.
Like you can have a dependentcare flexible spending account.
You can have one that justcovers like vision and dental.
So it is possible.
It is possible.
and as we talked about, eventhough we all save and invest
the funds in there, but you couldalso spend the funds in your HSA.
If you say, you know what, Idon't want to save it for later.

(18:57):
I want this HSA to be likesinking funds for me, or I want
to use it each year as I go.
That's totally fine.
There's no one way to use it.
And then the last thing I wantedto mention is that big difference
in a flexible spending accountand a health savings account.
So those are like
the basics that I really wantedto kind of Tap into and make sure

(19:21):
that everyone at least knew those.
So let's talk a little bit about I guess.
It's so hard to have a conversationabout HSAs without talking
about the high deductible plans.
And we all have experience with that.
So I get people asking me thingslike, So does that mean when you go
to the doctor you gotta pay full boat?
I could be paying hundreds of dollars.

(19:42):
And things like that.
So Jeff, what is your experience withusing a high deductible or an HSA
eligible health plan for your normalhealth care and not touching your HSA?
Well, what first you have to findout is, is what is the deductible?
That's the full amountyou're going to pay.
And then you need to figureout what the co insurance is.

(20:02):
Once you reach that deductible amount,is that going to be, you're going
to have, 70, 30 or 60, 40 until youreach your out of pocket maximum, you
have to kind of dial those numbersin and figure out what that is.
That dollar is going to be toyou until you reach the out of
pocket maximum, say like $7,200.

(20:23):
So that's how I, and like I said,I just, when I've ever gone for
healthcare, I just pay, whatevercomes through and send them the money.
Not touch the HSA because Ilook at that for future stuff.
I don't know if that's a good explanation,
is 80 20 and we've been heavyusers of it this year because
my wife had breast cancer.

(20:44):
So and I've been and that we hadn't used.
We had cash flow and everything andhadn't really had to flex our HSA.
And, I've been very impressedwith how it's worked out.
Yeah, so let me just share a littlebit of what is actually covered because
I think a lot of people are afraidof having to pay a lot of expenses.

(21:09):
when they need to see the doctor.
So there are some preventativethings that are covered.
Like our annual visits are included, likeyour wellness visits, those are included.
You don't pay anything for those, right?
And then, well woman, well child,all those included, but here's.
A list of things that are included.
You can see this if you'reon YouTube, but it's test.
Those things are included.

(21:30):
Screenings, vaccinations, cancerscreenings, like your mammograms.
And I mentioned your annual doctor'svisit, but even pregnancy care.
And this was something new, Jeff.
I wonder if you knew about this, but in2019, they came up with this where Several
chronic conditions could be coveredbefore you meet your deductible and they

(21:54):
listed specifically four of them, asthma,diabetes, heart disease, and depression.
So, you do talk to a lot of people about,HSAs and these high deductible plans.
Do you think that this addition changedsome people's minds or made them feel
a little bit better about, Possiblybeing on a high deductible plan.
I don't know, Jackie, if I would go thatfar, I think the bigger issue with people

(22:19):
is actually having the money set asidebecause my experience at my school site,
people had no problems having eight, nine.
$1,000 a month taken out of theircheck through the section 125 plan.
But one of them told me if myhusband had to go to the doctor and
write a check for 300 for a copayor deductible, they wouldn't go.

(22:43):
I thought I found that reallyhard because people are much.
prone to have it come out oftheir check as opposed to have it
come straight out of their hand.
That's what I see.
That is
really important because Isee this too and people will
potentially avoid preventative care.
The way the government sees it is youbecome a better consumer of health care

(23:06):
because you're more judicious when youaccess the system, but actually you can
find that people let, problems reallylinger until they become critical.
Yeah, you guys bring up agreat point because I think the
psychological side does matter.
None of us, especially you, Bill,as a physician, wants anyone to
psychologically feel like theyneed to delay healthcare because

(23:30):
of being on a high deductible plan.
So, when you are sizing up, whether it'sright for you, think about the side.
When you go to the doctor,are you okay with paying $150?
when you're used topaying a $20 copay, right?
So, just think about those thingsand that matters and your health
is paramount, so don't do anythingthat's going to keep you from it.

(23:51):
Now, I noticed you guys that It seemslike, for me, the hardest year was that
first year because there's a huge mindsetshift when you go from a traditional
plan to a high deductible health plan.
And I almost dropped my high deductibleplan the following year because there
was a medication that was not covered.

(24:13):
And I ended up paying almost 800 forthat because I had not met my deductible.
And so, we're talking about thisnow because open enrollment is right
around the corner for a lot of people.
So.
We don't want you to justcompletely skip over the high
deductible health plan with an HSA.
Consider it, but also thinkabout whether or not it would

(24:35):
benefit you by comparing it.
Give it an honest comparison on how itsizes up to your, High premium plan, but
you're low deductible plan positioning.
It can make a difference.
But just know that if you switch toif you decide to try a high deductible
plan, that 1st year might be a littletough, but it's because it's changed.

(24:57):
And remember, you only keep theseplans for a year at a time, right?
We have open enrollment every single year.
So let's go on and take a quicklook at, we briefly alluded to
it, flexible spending accountsversus health savings accounts.
So these are just side by side.
And the main differences I'm going toshow all these For flexible spending,
like I said, the keyword is spendingfor health savings account is savings.

(25:20):
Use it or lose it.
I'm going to show the screen ifyou're on YouTube, but the main point
thing I want to point out is thatfor a flexible spending account,
there are different types, like Bill,you were asking, can you have both?
And technically theanswer is yes, you can.
It depends on the kind.
So Jeff, how familiar are youwith flexible spending accounts?

(25:42):
they had one at my worksiteand I never used it.
And I think for you to have an HSAand a flexible spending account.
It has to be compatible.
And I don't know what the criteria isexactly that makes a flexible spending
account compatible with having an HSAbecause I think what the government

(26:03):
doesn't want you to do is just my opinion.
They don't want you tolike double dipping.
They don't want you to get a tax deductionon the HSA and also get a deduction there.
So that's my instinct.
That's my feeling, but I don't knowwhat makes it compatible because I never
used the flexible spending account.
I had
a flexible spending account when I wasat work and our kids were young and we

(26:26):
used it for all the pediatrician visits.
And at the time, I remember it was,there was a max of about $3,000.
And it's owned by the employer,which is why it doesn't roll over.
And as Jackie alluded to in aprevious slide, you cannot invest it.
It stays in cash.
So, it's subject to healthcareinflation and inflation in general,

(26:48):
but it's not going to be a bigimpact because it's year to year.
Yeah, and Bill, that's a great pointthat it is owned by the employer.
The HSA is owned by you.
You can actually open up your own HSA.
You don't have to use your employerones, although one of the benefits is as
I mentioned, that you don't have to payFICA tax if you do it through payroll.

(27:11):
So here's the what is allowablewhen it comes to HSAs versus
fSAs, Flexible Spending Accounts.
So you're allowed with an HSA, you'reallowed to have a Dependent Care Flexible
Spending Account, a Commuter FlexibleSpending Account, or a Limited Purpose
one, such as like Dental or Vision.

(27:32):
Now, I feel like out of all of these,you guys, I see the dependent care,
like for child care or for daycareservices, I see those offered,
so you'd be able to have that.
And then there's something calleda post deductible FSA, I guess,
once you meet your deductible,but I don't see this very often.
I've never seen this withanyone that I have worked with.

(27:53):
So The one thing that is notallowed with an HSA, to your
point, Jeff, you can't double dip.
You cannot have a medical flexiblespending account with an HSA.
That's when it is no longer compatible.
Okay.
That's fair enough.
Okay.
So we're kind of nerds and I do goand look at the IRS publication that

(28:17):
talks about the eligibility checklist.
And here's just a quick.
Checklist in order to open it, youdo have to be, on a high deductible
plan on the 1st day of that month.
And this checklist will come in handywhen we talk about the scenarios a
little bit, because it can get tricky.
You can't be claimed as a, as adependent on anyone else's tax return

(28:39):
and you can't have any, health coverage.
That's things like you can'tbe on Medicare and contribute.
you can't be on somethingcalled the Children's Health
Insurance Plan stuff like that.
Also, this comes up a lot.
Tricare.
Tricare is not An HSA eligible plan.
So here's just a few more.
and I mentioned, some of the other thingsthat is considered disqualifying coverage.

(29:03):
There's something calledIndian Health Service.
So these little nuances.
So when I use that term HSA eligiblehealth insurance plan, it's because
there's some other little nuances thatmight disqualify you from contributing.
Jackie, quick
question.
I had heard that there's alast month rule with regards
to the first day of the month.

(29:24):
Can you tell folks aboutthe last month rule?
Yes.
Let's talk about the last month role.
So the way that that worksis, well, you know what, Jeff?
I think you got a prettygood handle on that.
Tell us what the last month ruleis for contributing to HSAs.
The last month rule, if I remember itcorrectly, is at the very last month

(29:46):
of the year, if I'm remembering thiscorrectly, you have to have credible
coverage to be eligible for an HSA.
Did I get it right?
I'm trying to remember.
Like in December, you have to have Youhave to have it in place because what
they do is they take your contribution andbreak it up into twelfths, one twelfths.
And if I remember right, youhave to have credible coverage

(30:07):
at the end of the year, correct?
Yes.
I think you can max out youraccount though if you have it by
the first day of the last month.
But then there's
the testing period because thenyou have to have it moving forward
in time, if I remember correctly.
For a year, I think, for a year.
And there you go.
There you go with the IRS becausenothing can ever be straightforward.

(30:28):
So that's a great question, Bill.
So, I'll just mention the HSA limits.
They already have the limits out for 2025.
You knew that, right, Jeff?
Yeah.
Yeah.
Yep.
If you're single, youcan contribute $4,300.
And if you're on a family plan, thefamily is you and one other person.
Like when I was contributing, Igot to do the family plan A nd
that was just me and my daughter.

(30:50):
And then the catch up.
You know what?
I think this catch up contributionhas been a thousand dollars
for a long time, right?
It's not
indexed.
It's not indexed to inflation.
Okay.
It's not indexed to inflation.
And for me in 2025, I can do $5,300.
And that's because you are 50 or 55?
I'm over age 55.
Okay.
So it has to be 55 and not 50.
Like some of these other accounts.
You turn age 55, then you can do that.

(31:13):
And the $1,000 is notindexed to inflation.
Another thing that I do with the HSAand I have done with my other pre
tax accounts that I've never heardtalked about on the podcast is.
If I get a little bit of state or savingson the state tax, if it's going into
like a 403 B or IRA or on the federalside, I'll take that tax savings on the

(31:35):
federal and state and throw it in thereas well on top of the contribution.
Does that make sense?
Have
Tell us a little bit more about that.
I haven't heard that one.
Tell us
more.
Well, I don't mean to digress, butI've never heard anyone talk about it.
Like, you know when you're in a regular401k planning, you have an employer
match, and you put your money in andthey match up to 5 or 10%, right?

(31:56):
So think about it.
Say I'm in the 25 percent taxbracket, federal, and I put
a dollar in my HSA, right?
There's going to be a tax deduction.
So that 1 goes in the HSA is notreally a full dollar because I'm being
incentivized by the federal government,not by the state of California,
but by the federal government, thatwhat am I going to do with that?

(32:19):
25 cents, that tax deduction.
What am I going to do with it?
Is that going to fallinto my regular cash flow?
Am I going to put it in anotheraccount or am I going to reinvest
it back into the account?
So instead of me next year putting$5,300 in in 2025, It may not be a
full $5,300 out of my own cash flowtoday, because I'm going to use some

(32:43):
of the federal tax savings to makeup that $5,300, like recycle it.
I don't know if that makes sense.
Did I do it right, Jackie?
I don't
know.
I mean, you're just, it's just alittle trick that you kind of do.
Whoa.
Well, most people when they put moneyin their 401k and they get a match and
they put $1,000 and that saves themsome federal and state tax, right?

(33:05):
Oh, correct.
Correct.
Just like the mortgagededuction on a house.
Correct?
Right.
Right.
It's not like a credit whereit's a dollar for dollar.
It's a percentage based on whateveryour marginal tax bracket is.
So what I've done over my life ison the HSA now, since I'm using that
again, if it's $5,300, it may not bea complete $5,300 because I'm going to

(33:27):
be getting a little bit of tax savingsoff of my adjusted gross income.
If you're a higher, if
you're a higher earner, their $5,300may only really be $4,500 because
the difference between the $4,500and the 53 is the federal tax
savings that you're getting becausethe government is incentivizing us,

(33:50):
right?
In
California, I am not incentivizedbecause I don't get the $5,300
deduction on my state taxes.
I get it on the federaland then I have to.
My tax person has to add itback in on my state side.
Yeah.
Actually, since you're talking aboutthe state, California state specific

(34:15):
stuff, why don't we take just a secondand talk about some of these weird
states that actually don't allow atax deduction for HSAs is California.
And what is New Jersey and New Jersey?
And
then you said there's twoothers that have something with
their little weird.
It's a Tennessee and, and Bill, Idon't know if you know this, but

(34:36):
Tennessee and New Hampshire, they havespecial provisions around dividend
and interest income within your HSA.
But for California, New Jersey,you're in California, Jeff.
So.
Every other state in the nation gets adeduction for HSAs just like it is on
the federal level, but not California.
Why and how does it work?

(34:57):
Well, in 2005, when I started my HSA,I realized because I used to do my
taxes by hand when you used to sendthe booklets out of the gold school.
And I realized, oh, the stateof California is not going to
allow me to have the deduction.
And at the time I didn't realize I said,why won't they allow that to happen?
Well, because remember, Californiais more socialistic and I'm not

(35:20):
going to get political, but theydon't want people like me that are
healthy to leave the PPO plants.
They want healthy people likeme paying the full freight.
They don't want healthy guys and gals andyoung people to leave those PPO plans and
move on to high deductible plans becausethere's a propensity for people that are

(35:40):
high healthcare users to be on the richer,PPO plans, not on a high deductible.
So California over the years, there havebeen, I'm not going to get political
left and right, but there's generallythe right is always been trying to pass
legislation to make the tax code inCalifornia reconcile with the federal.
Okay.

(36:00):
Right now they're trying it again.
There's AB two, three, zero, noSenate bill two, three, zero.
That is moving throughthat would for five years.
Reconcile the state taxes with thefederal so you would get a deduction.
Also something else I didn't realize backin 2005 and I think I'm a money nerd.

(36:22):
I got to report my dividends andcapital gains to the state of
California, this regular income.
That just sounds crazy to me.
I did not do it for years.
I did not do it for years until I'mlistening and reading something.
I go, oh, publication 1001, pagesix talks about it at the tax

(36:44):
franchise board in California.
So I have to take this informationand share it with my tax preparer.
So if you, are you following thisor I tell the word it's, it's tual.
It's side of my HSA is.
Is the triple, right?
You talked about the triple,but not in California.
So, so I got a question for you, Jeff,not to be political or anything like that,

(37:07):
but do you think that that will change?
Has there been legislation to changethat so that California will follow
every other state in the nation?
SB 230 is trying to go throughagain, but there have been
several tries over the years.
And if you go in and look and who'ssponsoring the bill, it's all Republicans.
I'm not, and there is one Democratsupporting it, but you've got

(37:30):
to realize in our country, it'sindividualist philosophy, individualist.
I'm the individualist.
I have to take ownershipfor my healthcare.
I have to put money in the HSA.
I have to set it up.
Yeah, I get you.
Yeah.
Well, those are
just views and our list is mine,
but California does not incentivize me.

(37:55):
Well, since
you were a California guy,I just had to ask you that.
But so if you are listening fromCalifornia, Or from New Jersey, just know
that you have some unique provisions.
Also, there's slightly differentprovision for Tennessee and New Hampshire.
So let's go back to talk a littlebit about that last month rule.

(38:15):
So on YouTube, I'm justvisually showing this, but.
We talked about, the limits, they'realready out for 2025 and deadline is you
get to make contributions through the taxfiling deadline of the following year.
But here's how that last month rule works.
If you are eligible to make HSAcontributions on December 1st, you

(38:38):
can make a full year contribution.
But there is one catch.
You have to have to continue on ahigh deductible health plan or an HSA
eligible plan for the next 12 months.
And that's called a testing period.
Now, who does this mainly affect?
This is people that changesplans in the middle of the year.

(39:01):
So if you change plans in October, andyou're on that same plan as of December
1st, an HSA eligible plan, you can goahead and do a full month contribution.
That's a nice little benefit.
What you got Jeff?
I did that in 2019.
I'm getting ready to leave my district.
It's September, 2020, I'm gettingready to leave my district.
I'm on a non high deductible plan.

(39:25):
In September, I go onthe high deductible plan.
Then I leave the district.
I made the full contributioninto my HSA for 2019.
When I left the district at the endof 2020 I went on a high deductible
for three months employer plan.
Okay, I made a full contribution for2020, then in 2021 I went on to ACA.

(39:54):
Right.
When I went on to the ACA high deductibleplan, I had to stay on that for the
next 12 months moving forward into 2021to make sure that the contributions
I made, I got kind of screwed up.
We alluded to this before, but let'stake a quick check of some of the
common things that you can use.

(40:15):
For HSA dollars, okay, we know aboutthe doctor visits, we know about the
prescriptions and things like that,but some uncommon things, okay, you
can use it for Medicare premium.
Some people don't know that you canuse it for Part B, Part C and Part D.
You can use it to pay long term care.

(40:36):
Premiums, and we're going tojust show the whole list here.
we mentioned dental and hearing, as weget older, those things start to go.
We mentioned feminine hygieneproducts, legal abortions, if it's
legal, then you're able to do it.
Fertility treatments, that'sbeen coming up a lot lactation
expenses and even psychiatric care.

(40:58):
So these.
Expenses that you can use yourHSA dollars for can go a long way.
And the publication that youcan use to look and see if
something is covered by HSA.
Your HSA dollars is IRS publicationnumber 502 and there's a friendly,
I don't know if you've seen thislist before Jeff, but it's hsalist.

(41:21):
org, it's a very consumer friendlywebsite where it has everything
where you can check and seeif certain things are covered.
So we just wanted to kind of gothrough those just because we
know people get anxious about.
High deductible health plans, but it'sso hard to talk about HSAs without

(41:43):
giving you some base knowledge ofhow these HSA eligible plans work.
So, why don't we get intohow you supersize an HSA?
This is the fun part, right?
If you decide an HSA free or highdeductible plan or an HSA eligible plan
is for you and you have access to thehealth savings account and you decide

(42:07):
that you want to save, invest and useit for long term, how do you grow it?
How do you get this big potof money that some people call
like an IRA for your healthcare?
Things like that.
So Jeff, what did you do to growyour HSA to where it is now?

(42:27):
In 2006, I had started investing itat Health Savings Administrators.
What did you invest it in?
Yeah, I cannot remember exactly,but I know it was Vanguard products.
I don't remember exactly what I had itin, but I know it's Vanguard products.
What do you have it in today?
I have it at Fidelity, but Idon't use the Fidelity products.

(42:48):
I go out to Vanguard and I'musing a live strategy moderate.
I think it's 70 30 to fund afund of funds and everything.
It's about 13 basis points.
And I remember I had to take kind of ahaircut to go buy it because Fidelity
and Vanguard don't play nicely together.
And I think I had to pay like a $ 75fee to go in to buy it initially.

(43:10):
You have 1 fund in there and inthat you have 30 percent bonds and
and then 70 percent total stockmarket fund probably is the 70%.
Yeah.
And I look at it like.
It's a one fund forlife kind of portfolio.
And it's part of your entire portfolio,but say you wanted to take higher risk

(43:31):
in this, and this is the place to takerisk probably for as you want growth.
You could put your small cap valuein there and that'd be part of
an allocation to small cap value.
You could, I have it in a total worldstock fund, Jackie, I'll out her here.
She's the growth girl.
She has it in BUG which is, the toplargest 300 companies in the U S.

(43:53):
The Vanguard
growth fund.
And so I don't think youwant to keep it in cash unless
you're planning on using it.
I don't think cash is withthis supersizing concept.
That's just not the way you want to go.
And people it's just like witha Roth IRA, you can think.
You can contribute to it, but you got toremember to invest what goes in there.
You can't forget that piece.

(44:14):
And, for example, in my RothIRAs, I do the same thing.
I want to supersize them as well.
And I stick to one fund in there andlook at my allocation globally as opposed
to, and some people will say, oh, Iwant to have, stocks and bonds in there
and stocks and bonds in every account.
But I don't know that that'snecessarily the right way to do it.

(44:35):
What do you guys think?
Yeah, well, we don't want to givespecific investment advice, but I
think it's reasonable to say if you are
using it for the long term,make sure that your investments
match that long term horizon.
So if I had to like boil it down to likethree main things on how I supersize mine

(44:55):
and how someone else could if they wanted.
As a long term play, the first thingis maxing out the annual contributions.
Like, some people that I talkedto, they will take the employer
contribution and that's it.
They're not really contributingto it or maxing it out.
But if you're able to max it out again,you've got all those tax benefits, but,

(45:16):
do it through payroll and you don't evenhave to pay, Social Security and Medicare
tax, but max out the contributions.
Remember family, is justyou and one other person.
So it could be, if yourhousehold is, let's say you
and your spouse and four kids.
Well, you and one of the kids could beon the family plan A nd maybe the rest
of the family is, on a regular plan.

(45:36):
So you can almost, splitthings if you want to.
But if you're able to max out thosecontributions, that's a big piece of it.
And I'm pretty sure Bill, you'vebeen maxing yours out every year.
Okay.
Oh, yeah.
Absolutely.
of the first things I do, it'slike top of the waterfall.
Yeah, that's the top of my and Jeff,you were maxing it out each year.
Yeah, starting in 2019, but from2010 to 2019, I didn't do any.

(46:01):
Okay.
See,
that's where you're be, that'swhy you're behind me and Bill.
No, I'm just kidding.
. Well, I mean, Jackie, have you ever, have you ever calculated
say you used the UG, say you used.
The total stock market index and youstarted in 2004 and you had sort of
the average returns over that time.
What would be necessarilyyour balance today?
See, that is a nice little case study.

(46:23):
I came close to doing thatexcept I didn't start until 2008.
So, I'm over two hundred thousanddollars now just from doing that
for 12 years doing the familymax, so it'd be over two hundred
thousand dollars, more than likely.
What,
Just one comment.
Jackie, you could do somethingthat I couldn't do in 2008.
Invest.
Remember, the world is blowing up.

(46:44):
Yes.
So you had the stockmarket wins to your back.
I did.
I had the
sales.
Yes, you're right.
I'm not putting you down, I'mjust saying that No, you're
right.
A lot of your growth, I saw yourchart, I think like 56% growth.
Yeah,
well, that growth definitely the windwas at my back and not only for what
I had in my HSA, but in all my otheraccounts, because that's happens.

(47:05):
I'm no genius over here.
But that coincidentally happened at2008 was the time where I started.
Most of my heavy investing.
So that absolutely hada lot to do with it.
So the next part you guys is thatwe have all implemented this again.
You don't have to do it this way, butwe're talking about supersizing your
HSA and that's paying out of pocket.

(47:26):
For your medical expenses, Bill, youmentioned the sinking fund or having
some kind of fun so that you knowyou can cash flow those expenses.
Now I got a question for both of you guys.
Do you guys hold on to your receipt tobe able to reimburse yourself later?
Yeah, I actually, this is animportant part of the HSA.
I'm sure we'll get into itin your presentation again

(47:47):
later, but I have a whole file.
You're supposed to do it digitally.
I mean, I, I have a file folderof all my paper receipts.
And, there's some big ticket items andthere's small ticket items, but then
when I get an unreimbursed expense, I'llhave, I have an email folder for it too.
I don't have a Google drive full of it.

(48:08):
I'm sure you probably do because you'remuch more organized than me, but yeah,
this is an important one and tell them whyJackie or Jeff, tell them why, if you say
these receipts, what you can do with this.
Jeff, can you believe that billhas a folder of printed receipts.
You're
kidding us, right?
Bill.
I'm
getting in
line with him.
Cause I have the same thing.

(48:29):
Okay.
No, I don't have a Google driveand they're not all scanned.
And I got a file folder.
Well,
my suggestion for anyone thatwants to implement where they are.
Incurring expenses and theywant to hold on to receipts
to reimburse themselves later.
Digitally is probably better, even thoughBill and Jeff doesn't do it that way.

(48:52):
The main reason is that the print comesoff and who's going to keep up with that?
So I'm low key though.
I just have a digital file folder in myemail that says HSAs and it goes in there
.So the reason for this is that, Okay.
These expenses will start topile up over 10 year period.
You could have thousands of dollarsworth of unreimbursed expenses, and

(49:13):
you can cash those in anytime you want.
You simply file it with yourtaxes for that year, and you
take out the appropriate amountthat matches your receipts.
Now, I have done this, you guys, lastyear, I decided I don't want to keep
up with receipts anymore, even thoughit's digital, and I cashed myself out.
I think it was about $3,000.
Luckily, I didn't have a whole lot ofexpenses, but I decided now I'm retired,

(49:39):
so I'm going to start taking money outof my HSA to take care of my expenses.
But it was kind of nice that Igot to take that big chunk out.
And, I had the appropriate receipts.
I just didn't want tokeep up with them anymore.
But certainly some people could havesignificant receipts and they can decide
to reimburse themselves at any time.
There's no deadline to reimburse yourself.

(50:02):
Now, I think the biggest piecefor all of us is that we invested
the funds in the account.
So Jeff, I'm curious, did youknow from day one that you could
invest the money inside your HSA?
Nope.
Because at the time in 2004,there wasn't any options.
If I remember correctly, it wasn'tuntil 2006, I started investing in

(50:23):
But I knew that's whatwould happen eventually.
I could see in the future.
What would be.
Yeah,
because you were there from day one andthey didn't have an investment account.
So Bill, did you know from day one thatyou can invest the funds in your HSA?
I can't remember exactly.
I know I had at least aportion of it in cash.

(50:45):
it's a good question.
And I think today it'salmost a no brainer.
But, I think I had more of it in aspending account when I was with HSA Bank.
And I mean, when I started this, I hadn'twoken up financially and, wasn't an
investor in a forward thinking sense.
So I don't know, but I know it wasn'ta hundred percent stock index funds.

(51:07):
Well, you guys have figuredthis out, but you know what?
I did a little research around this andJeff, I don't know if you knew this,
but only 8 percent of HSA accountshave a portion invested, only 8%.
So the majority of people arenot investing in their HSA.
And so this is the big difference here.
That's a shocking number, really.
And I guess that 8 percentis the FIRE community.

(51:30):
Yeah, I was about to say, the 8percent is the FIRE community.
And the funny thing is I'vebeen tracking this for, I would
say, probably the last 10 years.
So about 5 or 6 yearsago, it was only like 4%.
It was even smaller.
So were talking about this justto make sure everyone knows
that you can invest in your HSA.
It doesn't mean that youhave to use it that way.

(51:52):
But for a lot of people, the truevalue of a health savings account
is the fact that you are able toroll it over from year to year.
And invest the funds.
So if it's a long term play, youdefinitely want to have it invested.
we talked a little bit about,what ours is invested in.
But, that's going to be up to you.
But think about your timehorizon and things like that

(52:13):
and how you want to use it.
So we talked a little bit about savingreceipts, that's a key piece that, is
considered sort of an advanced strategy,when you're ready to cash it out, you
can spend the money on anything becauseyou've already incurred the expenses.
But Jeff, what other bright ideasdo you have as far as using, an HSA?
Are you doing anything unique ordifferent that would be helpful?

(52:35):
Thanks, Bill.
Well, next year I'm goingto implement a strategy.
But I'm going to take it one step further.
You know how you have the onetime option of taking the your
contribution amount out of your IRAand transferring it over to your HSA.
It's a one time.
I was thinking about doing that, butI'm going to do IRA to HSA conversions.
I know the.

(52:55):
Is IRA to Roth conversions, but I'mgoing to be doing IRA to HSA conversions.
And you're saying, whatis Jeff talking about?
Well, my strategy is next year.
I'm going to turn 60 right now.
I had last year, I moved all of my fourOh three B seven into an IRA at Vanguard.
So next year, instead of using.

(53:17):
The $5,300 out of my cash flow tomake my contribution in the very first
part of January, I'm going to takea distribution out of my IRA because
I'm age 60, so there's no 10 percentpenalty, it's going to go into the HSA,
I'll get the federal deduction.

(53:40):
So that'll wash part of the distributionaway, but I'll still have to pay tax on
the $5,300 to the state of California.
Because they don't give me.
A deduction for my HSA contribution.
so when you are over 60, so you can do it.
It sounds like you'redoing it in the two steps.

(54:01):
Now, when you do this formaltransaction, I'm not going to do the
formal one.
I'm not, you're not.
Okay.
I thought I'm not, I'm sorry.
I'm sorry.
Skip.
I'm not going to do the formalone because I don't feel that
Vanguard is educated enough.
To get it over to fidelityand then code it properly.
No offense to van.
Well, no, I see what
you're saying.
So let's explain that to everyone.
Okay.

(54:21):
Because you're over the age of 60,you're not going to pay a penalty.
So you're simply doing a two steptransaction that is really not a transfer.
You're actually taking a potof money from your IRA and
you're putting it into your HSA.
Yeah, I'm
taking a distribution.
You're taking a distribution.
Just like if I wanted to go put a downpayment on a car or something, but I'm
going to put a down payment into myHSA for my future 80 year old self.

(54:46):
No matter how well Jeff takescare of himself in Redding,
California, he's going to get oldand I'm going to need health care.
Yeah, so I want to point out
something, Jeff.
So you think very intuitively andthere are maneuvers that you can do
just by stepping through the process.
But when people are talking about this1 time IRA to HSA transfer, there is no.

(55:09):
Age limit for that.
So why don't we talkabout that a little bit?
I guess the formal term, Jeff, if you'reusing this is a trustee to trustee
transfer, they don't allow rollover.
So they you're allowed to movemoney from an IRA to an HSA.
But there's a lot of gotchas.
Okay, so, and I used to thinkthat this was really a big deal.

(55:31):
I don't know that it's that big a deal.
The biggest reason is thatyou can only do it once.
And you have to be on a high deductibleplan A nd able to contribute to an
HSA, and you can only do it up to themaximum contribution for that year.
So I wanted to kind oflist the pros and cons.
So here are the cons.
Again, only once in your lifetime.

(55:53):
You have to be on an HSA eligibleplan, and here's this term again,
you guys, this testing period.
So when you do this IRA to HSAtransfer, you have to continue being
on an HSA eligible plan for the next12 months for the testing period.
So if you have an inkling thatyou're not going to be, you
might not want to do this.
Another way you can do it too is youcould go IRA at Vanguard, the 5300,

(56:17):
transfer from custodian, custodianto an IRA at Fidelity and then tell
Fidelity now convert that IRA to myHSA for a contribution for that year.
That's another way of doing it.
Yeah.
And you got to remember also the age.
So the ways that you do it sort ofin a roundabout way, if you're over
60, then yeah, that might work.

(56:38):
But I don't want anybody getinto a situation where they're
paying a penalty or anything.
It's kind of like a backdoor Roth over 60.
Yeah.
Exactly.
Nice.
Sounds
very creative, Phil.
Very nice.
Hey, we we're thinkers over
here.
Very,
yeah.
Very
creative.
We're thinkers over here.
I like that.
I'm thinking, I'm thinking over here.
. Hey, he's thinking
over
there.
I see the wheels are
spinning.
Yeah.
And, and I see your, your,their forehead wrinkling up.

(57:00):
So I know that you'rereally thinking , but Jeff,
you talked about conversions.
This is a onetime thing.
Were you intimating that youwere gonna do it more than what?
Yeah, I'm going to do it for age 60, 61,62, 63, and then part of age 64, because
I learned that when I go on Medicare.
In April, when I turn 65, and on mybirthday, my 65th birthday, there's a

(57:24):
retroactive period on the part A, so Iwon't be able to make a full contribution
into my HSA when I'm 64 years old.
So isn't that anotherlovely gotcha in the life?
This is a window for Rothconversions, basically.
It could look a lot like a Rothconversion, though, if you kind of
think about it, because remember HSAdollars, they're tax free going out.

(57:46):
So again, the transfer that we're talkingabout that formally falls under the HSA
transfer, you could be any age to do that.
What Jeff is talking about isthat, I mean, that's like the
advanced, advanced PhD class.
for supporting.
Started to do some different things
on higher.
You're actually educating me.

(58:06):
I didn't even think about that becauseI was thinking about the confines of
this one time IRA to HSA contribution.
But once you're past that 59 and ahalf penalty, you've got a new window
of opportunity to do some things thatyou wouldn't want to do when you're
younger, where you have to pay thepenalty because it might not benefit.
I could have done it this tax year.

(58:27):
I could have done it this tax year.
That would have been 59 and a half.
Yeah.
When'd you turn 60 Jeff?
When's your birthday?
20
to 25 April.
So I'm going to, I'm going to do it.
And I always fund my HSA and my IRAand all that at the very first of the
month, the first of the year, becauseyou want all that time for it to
grind.
It's like planting your seed early.

(58:47):
That's a very important thing.
A lot of people dollarcost average into this.
And if you're able, number one, you haveyour sinking fund for healthcare expenses.
Number two, you pre save.
For your HSA contribution in the 1stweek of January, because as Jeff said,
that gives you 14 months of growth.
This is a lump sum approach as opposedto a dollar cost averaging approach.

(59:11):
Yeah, let me mention this toyou guys as a corporate girl.
I know most, mostemployers do it this way.
They won't even let you put in alump sum when it comes to HSAs.
They will only allow, mycompany will only allow it.
And almost everyone I've talkedto and looked at theirs, their
company will only allow them to makecontributions on a per pay period basis.

(59:36):
Now they may lump sum the employercontribution at the beginning of
the year, but they're even thoseare starting to be spread out.
So your company or your employer mayor may not allow you to put in the
lump sum at the beginning of the year.
Many of them don't, butjust keep that in mind.
You might not have a choice and Iwouldn't want you to give up the payroll

(59:59):
deduction contribution tax benefitwhere you don't have to pay social
security and medicare tax becauseif you don't do it through payroll.
it'll just show up on yourtaxes and you don't get that,
payroll tax deduction benefits.
So just FYI on that.
Bill is self employed technicallyand Jeff, you were able to
do some things on your own.

(01:00:20):
So just FYI look at youremployer and see what they allow.
And just
just as an aside, I do the same thing withmy Roth contribution for me and my wife.
I mean, I pre save for that.
Now, I do that
as well.
Dump that in the 1st of the year as well.
Yeah, I do it where I have control.
So with the when I used to contributeto a Roth, then I would do that

(01:00:40):
at the beginning of the year.
What I used to do with my employer todrove payroll crazy is, is I called
it extreme paychecking was my term.
Oh, I remember you saying that.
I would pull my paycheckdown to 24 net pay.
and claim zero on all the taxes andfront load my 403b7 early in the year and
then just live off of savings and that.

(01:01:04):
And then once I got it maxed out, thenI would turn the paycheck back on.
Gotcha.
And
I, and I heard that you would do that.
So that is awesome.
Now, so far you might think,I don't think HSA or IRA to
HSA transfers are a big deal.
So let me just mention a few of the roles.
Remember it's not a taxable event.
And it is a funding source for the yearthat you choose to do this, so you don't

(01:01:27):
have to find dollars from somewhereelse, you're moving it from your IRA.
And then the last thing Bill, I think youalluded to this, you can almost look at
this one time IRA to HSA transfer as atax free alternative to a Roth conversion.
Because once this money getsinto your HSA, It's not taxable.

(01:01:47):
So again, because you can onlydo it one time, the normal way,
because you can only do it one time,it's just not that big of a deal.
But it isn't a maneuverthat might be helpful.
I'm also thinking it might be better todo it after 55, where you can actually
have the extra $1,000 catch up but you dostill have to be on an HSA eligible plan.

(01:02:08):
So this is something thatyou may have heard about.
I don't hear about it that much, butthere's that one time IRA to HSA transfer.
So, so that's a fancy little thingthat people can do with their
HSA, but, we might've alluded toa few of these other bright ideas,
but let's take a look at them.
So Bill, why don't you take the first one?
We talked about this a little bitbefore, but this is a nice, bright idea.

(01:02:31):
Okay.
This is like an HSA Smackdown.
This is this is a caged fight.
They're not really a fight, but it is.
See, Bill, you should havebeen watching for that.
You got all excited.
Oh, wow.
Well, so our bright ideas for HSAsas we try to wrap this up a little
bit, but we have hit you with a lot.

(01:02:53):
So you may want to go back andreference, but as a reminder, this entire
presentation will be available for freein the show notes and you will be able to
go through it, reference it or whatever,but it is chock full of information.
So Bill, what aboutthis first bright idea?
Okay, we've mentioned this a little bitbefore, but we'll reiterate it here.
Save your records.
And then as Jackie does digitally,Jeff and I are old school and we still

(01:03:19):
have file cabinets, but reimburseyourself anytime in the future.
Even before you turn, 65, you cando this anytime that you need the
money and it will have grown and comeout tax free with these receipts.
And in the meantime, invest thefunds to allow it to compound.

(01:03:40):
Yep, and we did talk aboutthat a little bit, but that
is definitely worth repeating.
Now, this second one I'll talk a littlebit about because I was able to do this.
I think Bill, you're actually able todo it, but a person that is covered
on your plan that is not a taxdependent Can open a separate health
savings account and contribute to thefamily maximum in their own account.

(01:04:05):
This almost soundsunbelievable, but it's true.
So an example would be if you have anadult child, that adult child up to 26 may
be on your family health insurance plan.
That's HSA eligible, but if they'renot a tax dependent, technically,
you cannot pay for their expenses.
out of your HSA.

(01:04:26):
So the IRS has a provision to say, okay,since you can't pay for this person,
since they're not a tax dependent,they can open up their own HSA and
contribute to the family maximumbecause they are on a family plan.
Now, again, this will apply toperhaps an adult child or it
could be a domestic partner.
Now, not for married couples,but a domestic partner.

(01:04:49):
So this can really, and let's sayfor instance, if it's an adult child,
that adult child they don't have tobe the one contributing to the HSA.
You can put money in there for them.
And so Bill, you've got kids thatare under 26 that is on your plan.
Is that right?
Yeah, they're 25 and I justlearned about this thing.
So this window between whatever it is,18, 21 exiting college again, this is

(01:05:12):
another window for fancy HSA strategies.
But I think Jackie, you did this, right?
I did.
And I didn't know about itat 1st either, but I did.
The reason why I learned about itwas because I wanted to pay for
some of my daughter's expenses.
I was looking something up andI'm like, Oh, I can't do that
anymore because she was like 22and she was no longer my dependent.

(01:05:34):
And then I saw this little provision.
So my daughter, She's too old nowshe's like 28, but while she was
when she was done with college from22 to 26, I could have maxed out her
HSA to the family maximum and maxedout my own to the family maximum.
Now I didn't have the big buckso I couldn't do that every

(01:05:55):
single year, but I did start alittle bit of a HSA fund for her.
Separately so yeah, thatcould go a long way.
And in this presentation, we have ascenario that goes through this, that
kind of steps you through it because, Ithink it can be a little bit confusing.
And that's where most questions come from.
So let's look at another bright idea.

(01:06:16):
so Jeff, I'm wondering, areyou planning to pay for your
Medicare premiums with your HSA?
Is that when you're goingto start drawing it down?
Come on, Jackie.
What do you think?
Come on, you know me.
We have never met
personally.
What do you think I'm going to do?
What do you think is going to becompletely different to not norm?
Yeah, I think you are.

(01:06:36):
You can pay for what part?
No, no, no, no.
He wants
to grow.
I'm
not going to use it topay the B and the D.
Not going to.
Going to let it grow on until I'm 80.
Until you're 80.
Well, that's optimistic.
And you know what?
You'll probably live until you're 100.
So my dad made it to 93.
So that's your drawdown strategy.

(01:06:56):
You want to use it inyour much later years.
Yeah.
When.
My body your body is just like anyother use asset, like a car or a house.
It wears out no matter what you doand how well you take care of it.
And I know as sure as the sun's goingto rise tomorrow, I will be needing
healthcare when I'm in my eighties.

(01:07:16):
So you're looking at it as like selffunding your long term care insurance.
Right.
You got it.
You got it.
But I've been told by otherfinancial planners, don't use
the HSA for long term care.
Go for you.
What is it on the taxes?
If you're adjusted, if you spend 7.
5 percent on health care, you can geta deduction basically or something.

(01:07:37):
that's a good point.
The other thing is that the longterm care premiums, it's not that big
a deal in my mind only HSA dollarsto pay long term care premiums
because long term care premiums aredeductible to a certain extent already.
So having the HSA make it tax deductibleis not necessarily anything that you

(01:08:01):
might not be able to get a different way.
Yeah,
I'm going to be paying my Medicareout of my IRA and letting my
Social Security bill till age 70.
Gotcha.
So you got that drawdownplan A ll taken care of.
I
got it all written down through the ages.
Yeah, that's and then let the my securitybill till age 70 and start drawing down.

(01:08:23):
That's one of the reasons why I'mgoing to do the my term IRA to
HSA conversions or distribution.
Sorry, distribution because my my IRA bymy income standard just shot over 655,
000 like it was, yeah, standing still.
And I know someday it will beapproaching a million, million
and a half when I'm Yeah.

(01:08:44):
So that's why I'm going to takea little air out of the tires.
I
like that.
I mean, this reminds our audience that,if Jeff York was a financial advisor,
you would want to use him because he'sgot this drawdown strategy and HSA.
Tips and tricks down.
Yeah.
And I have one more brightidea, you guys, and who kind of

(01:09:07):
inspired this a little bit, bill?
We had Chris Gawlik on the showand she's all about a smile and
a suitcase and a smile where sheis a nomad, she's traveling all
over the place internationally.
So this is inspired by her.
You can use your HSA funds abroad.
Think.
Medical or dental tourism.
If the procedure or thecare is legal in both the U.

(01:09:31):
S.
and the foreign country it just doesnot include where you can, purchase
drugs and have it shipped to the U.
S., but you can be in Bali.
You could be in Thailand andget a legal procedure done.
Let's say if you, I've heard aboutthese places where you can go and
get your annual workups at theseplaces abroad and they give you

(01:09:52):
this hotel like place to stay in.
Or if you have this dental workthat you need done, a lot of people
I've heard you can get it donemuch cheaper in another country.
You can use your HSA dollars.
For that, as long as it'slegal in both countries.
Now, that's a little knownfact that I hadn't heard about.
And there was a, I think there wasa dentist or a doctor that did that.

(01:10:13):
And he shared his whole storyabout how much he saved by
being in the other country.
and the fact that he's used hisHSA dollars to pay for the cost
and the expenses which madeit even cheaper and tax free.
So he's doing a geographicalarbitrage on his health care.

(01:10:33):
He's using his tax deduction anddoubling up by going out of another
country where that health care isa lot cheaper is what he's doing.
I guess you could get internationalhealth insurance and pay your
premiums with your HSA, right?
Yep.
I don't know if youcould pay your premiums.
with your HSA dollars because generallyyou can't use your HSA dollars
for premiums unless it's Medicarepremiums COBRA while you're getting

(01:10:58):
unemployment and things like that.
So I, I don't think you could,I'd have to double check on that.
But good idea.
we're thinkers around here.
I'm sure Jackie will get it down.
And guys, we got all encouragedJackie to write a book on this
because this would sell likehotcakes, a little booklet on this.
all the HR people in thecountry would want it.
You have to and all the people thatare on these plans would want it.

(01:11:21):
So Jackie, Yes, this presentationis important, but we want a
book with your name on it.
I do need to write that book.
Yeah, you need another project, Jackie.
Yeah, exactly.
Well, on that note, we're going to takea little break and we'll be right back

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Mind Blowing ways to Maximize Your Health Savings Account (HSA) | Jeff York | 98