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If You Have an HSA, DON鈥橳 Do THIS! - Health Savings Account For Financial Independence - YouTube
Channel: Jarrad Morrow
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a health savings account is one of my
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favorite secret weapons out there to
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grow a measly 3 550 one year
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contribution into a 27 000 triple tax
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free lump sum of money and all you have
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to pretty much do is make one change
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that i'll mention later in this video
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then sit back and literally twiddle your
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thumbs and if you don't have thumbs then
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you can just twiddle your freaking toes
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we can call you toe twiddler but there
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are a few things that you need to watch
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out for when using an hsa so in this
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video i'm gonna go through some of the
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pitfalls and mistakes that i see way too
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many people make with a health savings
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account that basically wipes out all of
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the benefits from using one i'll also
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share some of my hsa pro tips throughout
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this video that i am 100 sure will
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benefit you hey i'm jared with two a's
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and two rs and over here we like to talk
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about investing and financial
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independence if you get some value from
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this video then please do be a huge
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favor and hulk smash that thumbs up
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button my dogs molly and cooper would
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greatly appreciate it if you have any
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questions throughout this video then
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please leave them down in the comments
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below and i will do my best to answer
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every single one of them for you and hsa
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isn't all fun and games because you have
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to be enrolled into a high deductible
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health plan aka an hdhp to be able to
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contribute to one i know it sounds
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strange but yes i am going to try to
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talk you out of an hsa for a minute
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because i have a conscience and it's
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just the right thing to do if you have
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medical expenses while enrolled in a
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high deductible health plan then it's
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most likely going to cost you more money
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up front compared to if you just
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enrolled in a regular health plan it of
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course says it in the name high
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deductible health plan but i think it's
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important to specifically point that out
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with an hdhp your monthly premiums are
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going to naturally be lower but if you
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have any medical expenses throughout the
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year then it's going to take a little
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bit more money out of pocket out of your
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pocket before you reach the deductible
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and your coverage kicks in this isn't a
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reason to completely avoid an hsa
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altogether or to freak you out but it's
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something to keep in mind if you're
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expecting any large medical expenses
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anytime soon then you might want to
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avoid an hsa until that's out of the way
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the younger you are the healthier you
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most likely are so that's the time to
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really take advantage of an hsa but
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let's not sugarcoat this whole thing
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though now the health nut in me is just
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going to come out and say it if a lot of
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your current medical conditions or
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potential future medical conditions
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could be avoided or reduced by
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implementing a more healthy lifestyle
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today then that's what you should start
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working on the more unhealthy habits
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that you have in your life the higher
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your future medical costs are going to
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be and of course the more unpredictable
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they become nutrition sleep stress
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management and physical exercise
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and those are the four pillars that i'm
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personally always working on and
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refining to help reduce my medical
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expenses and hopefully live a lot longer
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get those four pillars in order then you
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can feel more comfortable getting a high
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deductible health plan so that you can
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actually start contributing to an hsa
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instead of being freaked out by it to
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the point of never being able to take
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advantage of one i also need to point
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out that in hsa and fsa are completely
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different i received an insane amount of
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questions about this on my last hsa
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video so i can tell that there's a lot
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of confusion around this with an hsa you
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don't have a time limit as to when you
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have to spend money from the account but
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with an fsa you have to use the money
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you contributed by the end of the year
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and if you don't then you lose the money
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you're essentially forced to go buy a
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whole bunch of medical stuff that you
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might not need at that point in time or
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anytime in the near future let's be
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honest you can only fill your cabinet up
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with so many band-aids peroxide and
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tylenol you also cannot grow your fsa
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money like you can with an hsa but we'll
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cover that in just a minute always
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double check to make sure that the
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health plan you're signing up for is hsa
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eligible i would hate to see you get
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stuck with an fsa for a year thinking
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that you were going to be eligible for
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an fsa i've had more people than i can
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count on both my hands and toes combined
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tell me that they contributed to their
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hsa but they missed the most important
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step and that's actually investing their
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hsa money the employee benefits research
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institution even came out with a report
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in 2021 about how only five percent of
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hsa accounts that have been opened for
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one year are investing their money yes
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the amount of hsa accounts that are
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investing increases as time goes on but
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it only tops out at 20 percent of
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accounts at the 15 year mark none of
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these people were doing anything wrong
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either they just weren't told that
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investing your hsa money was even
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possible growing that 3 50 one year
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contribution into 27 000
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can only happen if you choose to invest
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the money within your health savings
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account every hsa provider should give
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you the opportunity to invest your money
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but if they don't and you want to then
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transfer your money out of there as soon
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as possible i'll give you my two hsa
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provider recommendations in just a
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minute the power of investing your hsa
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money is absolutely off the charts now
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i'm a weirdo who prefers to go all in on
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investing 100 of my hsa money so that i
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can turn it into a 395
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000 tax free investment account but if
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you're someone who isn't comfortable
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doing that then it's not a big deal at
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all you can always have a roll for
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yourself to invest say half the money
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and leave the other half as cash in case
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you want to spend it on medical expenses
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heck even if you don't want to invest
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any of the money an hsa to be honest
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with you is still beneficial from a tax
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savings perspective but no matter what
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you do with your hsa money you at least
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want to make sure that the provider
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you're using isn't charging you any fees
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to use them the nice thing about an hsa
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is that you don't have to stay with the
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provider that your employer chooses for
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you here's the thing all of our
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employers choose an initial hsa provider
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that they want to work with it could be
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health equity hsa bank optum
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bend the hsa authority fidelity lively
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or any of the many more that are out
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there for example my employer chooses to
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use health equity so every month my
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employer will take my hsa contribution
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from each paycheck then deposit the
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money into a health equity account the
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problem that i personally have with
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health equity and you might have the
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same problem with your hsa provider is
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threefold number one they force me to
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leave at least one thousand dollars
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uninvested at all times now for a guy
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who wants to invest 100 of his money
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that's extremely annoying especially
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because it's my money and i really don't
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like them trying to tell me what to do
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with my money number two they charge me
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a point zero three percent fee every
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single month on the money that i have
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invested now let me be clear so i don't
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sound like a complete a-hole point zero
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three percent is a very low and
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reasonable fee but if i don't have to
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pay it then i don't want to pay it and
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number three they have very limited
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options when it comes to what i can
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invest my money into the good news is
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that once the money is in the hsa
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account that your employer chooses
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you're able to transfer the money out of
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that account at any point in time and
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into one with any provider that you want
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the two hsa providers that i always
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recommend are lively and fidelity now
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they both charge zero fees they allow
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you to invest all of your money and the
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investment options you have available to
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you are endless fidelity is a brokerage
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account so you use them to directly
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invest your hsa money but lively has
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partnered with td ameritrade so once
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your hsa money is in your lively account
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you can easily transfer it into a td
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ameritrade brokerage account i'll have a
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link to check them both out down in the
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description full disclosure i personally
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use lively i transfer all of my hsa
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money from health equity to a lively
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account every single month so that i can
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invest it one more thing to mention the
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lively link is an affiliate link which
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helps support myself and of course my
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dog molly at no extra cost to you but if
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you prefer fidelity instead by all means
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open up an hsa account with them real
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quick at the end of this video above my
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head and down in the description i will
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link up another hsa video that i made
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where i go through even more hsa hacks
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and ways to maximize the account there's
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a lot more that i can't add in here
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because i don't want this to end up
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being a 40 minute video so go check that
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out after this one but whether you plan
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to use an hsa as an investment account
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or as a way to pay for medical expenses
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when they come up you have to keep track
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of the money that you spend on medical
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costs the receipts from those expenses
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should essentially be looked at as
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dollar bills because they basically are
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this could potentially burn you big time
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if we get to some point in the future
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and you're ready to withdraw money from
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your hsa account for an expense that you
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had five plus years ago if you don't
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have a paper trail to prove that you
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actually spent money on medical costs
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that align with the money that you're
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withdrawing then i would recommend
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thinking twice before taking that money
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out of your health savings account all
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it takes is for the irs to audit you one
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time see that you withdrew money from
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your hsa then ask you for the receipts
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to show proof if you don't have this
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proof then have fun with whatever fines
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they impose on you i actually know a guy
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who got in trouble with this he went to
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walgreens and paid for his prescription
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with hsa money but he also threw in a
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couple candy bars in there as well he of
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course got caught and had to pay a fine
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saving your receipts and tracking it all
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is not only going to save you from this
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potential headache but it's also going
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to give you a way to actually know how
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much you can feel comfortable with
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drawing from your hsa account in the
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future plus if you're using an hsa as an
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investment account and plan on
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withdrawing the money in 20 years then
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how the heck are you gonna remember what
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you've spent over that period of time
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i'd argue that it's pretty much
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impossible sometimes your hsa provider
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will keep track of all this for you but
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in my opinion that is just not good
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enough i would go as far as saying that
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you should track all of this on your own
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outside of your hsa provider not because
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they're doing something wrong or
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nefarious but because the more that you
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rely on them to keep track of all this
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the harder it is for you to switch
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providers at some point in the future if
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you eventually become dissatisfied with
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them let me break down my foolproof
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process of how i track my medical
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expenses so that i'm able to fully
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capitalize on the benefits of a health
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savings account this should help you
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implement the same strategy into your
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life all you need are four things number
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one some sort of free online storage
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like google drive number two a
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spreadsheet like google sheets or
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microsoft excel number three a phone
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with a camera or some way to take a
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picture of the receipt number four an
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internet connection now every time that
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you have a medical expense you'll take a
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quick picture then upload it to the
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cloud storage location of your choice i
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personally have two different folders to
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help me organize everything the first
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one is called to be paid out and the
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other is called paid out for the
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expenses where i haven't cashed them in
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yet i'll put the receipts in the to be
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paid out folder when i eventually cash
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out that receipt amount i'll move it to
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the paid out folder that way i always
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have a paper trail in case the irs wants
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to audit me a couple years after i
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officially take ownership of that
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medical expense money to help keep track
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of the hundreds of receipts that i'll
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eventually cash in on i need to name it
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in a way that's going to be easiest to
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filter through in 20 plus years when i
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start withdrawing the money the way i do
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that is by naming each file by the
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dollar amount and the date of when i had
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the expense the reason i start with the
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dollar amount is because in 20 years i'm
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gonna be cashing out hsa money based on
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a lump sum amount it's going to be
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easier for me at that time to find all
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of the receipts that add up to the
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amount that i'm withdrawing for example
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in we'll say 25 years if i want to
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withdraw one 1 000 from my hsa i'll go
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find multiple receipts that add up to 1
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000
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then consider those receipts as how i'm
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accounting for that amount i'll then
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move the receipt copies to the paid out
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folder and be done with it there is one
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more step just to make everything a lot
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easier i also account for each expense
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in a spreadsheet that i created for
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myself which i call hsa spreadsheet
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tracker that way i can cross-reference
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the copy of a receipt that has the
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amount and the date on it to a line item
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in the spreadsheet right before or right
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after a copy receipt is uploaded to my
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google drive i'll add the same info into
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the spreadsheet right here as you can
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see i have the date type of service the
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cost company i paid for the service
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whether or not it's hsa approved
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confirmation that i uploaded the receipt
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and whether or not i've paid myself out
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for that receipt if you want you can
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choose not to add the hsa approved
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column i'm just a weirdo who also likes
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to track any medical related info in
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this spreadsheet beyond the hsa info you
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should always account for all medical
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expenses large or small in your hsa
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spreadsheet tracker no matter what now
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there's two reasons for this first even
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the most random of medical expenses are
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actually hsa approved eye drops cold
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medication headache medication
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babysitting services summer day camps
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for your kids contact lenses and a lot
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more the second reason to track
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everything related or potentially
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related to medical costs is because as
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time goes on the list of hsa approved
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expenses will continue to grow a quick
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pro tip that i have is that amazon
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actually has a storefront dedicated to
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hsa approved items only so if you use
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amazon to purchase any of these sorts of
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things then they make it easy for you to
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filter through what is actually accepted
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feel free to leave any questions or
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comments down below don't forget to hit
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that thumbs up button before you go as
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well check out the description for a
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bunch of different ways to get some free
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stocks open up a lively account and more
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resources on investing and financial
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independence watch this more in-depth
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hsa video to your left to next with a
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lot more tips on how to maximize your
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health savings account i'll see in the
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next one friends done
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