No one wants to worry about healthcare costs and out-of-pocket expenses all of the time, so most of us succumb to an out of sight, out of mind mentality. As such, once you sign up for your HSA, you leave it until you see that healthcare bill come in the mail. There is one more very important step you might have missed. We will show you how adding $1 or even $0.01 to your HSA, can make all of the difference.
HSA Day 1
You just opened your HSA. What should you do next? The most important and simple step you can take is to add a penny. We are in no way advocating that you shouldn’t consider making payroll contributions, if they are available to you, or using one-time contributions when financially feasible to save more for your future healthcare expenses, but if that route is not workable with your current income levels or situation, let us show you how to work the system to your advantage and make sure your HSA is available when you need it.
Establishing an HSA
The most important thing you can do (once you qualify to open an HSA) is to establish an HSA. “Establishing” means different things and unfortunately varies state by state. In some states, it’s as simple as opening up an account. See your tax professional for more information. In other states, it means you have to open the account and fund it with as little as $0.01. This is commonly referred to “penny funding” and meets all federal requirements for establishing an HSA. Here at Lively, we help you establish your HSA by providing the first cent into your account so you don’t have to worry about the qualifications of establishing an HSA.
The importance of establishing an HSA, is that you can use HSA funds for expenses incurred before your account actually had the money in it! That’s right, you can back-date it and reimburse yourself when you do have enough money in your account. Any costs (based on purchase date), post-HSA establish date are eligible. Establishing an HSA just adds more flexibility to your healthcare payment options. If you need more details on HSA eligibility, you can read about the healthcare plan qualifying details here. This isn’t universal, but a Lively individual HSA is free, and you can sign up in minutes!
Open Now so You Can Save Tomorrow
Based on the IRS HSA guidelines, you can pay for qualified out-of-pocket medical expenses using your HSA, after they occur. This means you can make one-time contributions to pay for medical bills or expenses (prescriptions, etc). Why would you do this? To take advantage of the tax-free money. HSAs allow for tax-deductible contributions, tax-free interest/investment gains and tax-free withdrawals (for qualified medical expenses) which means you can use tax-free money from your HSA to pay for health expenses. For many, this means a 25% savings off the retail cost (assumed combined federal and state income taxes for individuals or families). Then use your HSA debit card to pay for those expenses or upload your receipts to get reimbursed. It’s that simple. Find ways to save money, with no additional cost to you. It can make a big financial difference.
There is a lot to take into consideration when reviewing short-term HSA contributions and long-term HSA features like investments to ensure you have access to money today and build a health nest egg for years to come. But while you review those options, with a qualified financial planner or tax expert, the most important step you can take and surely the easiest is to add one penny to your HSA. A Lively HSA is free for individuals, so you can always use the money you saved to fund your HSA on Day 1.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.