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5 Common HSA Pitfalls

Lively · April 5, 2018 · 4 min read

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Don’t miss the HSA opportunities that are here for the taking. It might be costing you money. We want to help, so we outlined the most common HSA pitfalls. By avoiding these common mistakes, not only can you ensure you aren’t losing out on many common HSA benefits, but your diligence will add some less understood HSA benefits that can save you even more.

Common HSA Mistakes

1. Open but Don’t Establish an HSA

You took the time to open, but never “established” your HSA. Establishing an HSA differs from state to state, but for most, it is as simple as adding a penny to your account. After which you can add funds and pay for qualified out-of-pocket medical expenses using tax-free dollars post-dated to the date you established your HSA. Establishing your HSA unlocks all of your potential HSA benefits. You don’t need to fully fund your HSA to take advantage of your HSA, you just need to add a penny.

2. HSA Platform Fees

Your money should stay your money. Many HSA providers nickel and dime customers with hidden fees that average $26/year according to a recent Morningstar report. This is money that is being taken from your health savings.

Over the life of the HSA, this can reach almost $1,000 in lost HSA money (assumes 25 years at 3% annual compounded growth). Do your research and find free HSA providers, like Lively, so you can keep what is rightfully yours.

3. Forgot to Turn on Automated HSA Savings

It is so easy to set and forget your automated HSA contributions. Set it up once and let the contributions roll in and build over time. By not taking that approach you are limiting your HSA savings to the once and a while or ad-hoc contributions. Start with the contributions that make sense for you (and adhere to yearly IRS HSA contribution limits). Add from there.

4. Not Logging Qualified HSA Expenses

Even if you decide to pay for a qualified out-of-pocket HSA expense, you should upload the receipt and log that expense. Why? Once the log you expense you can take that money out of your HSA, 100% tax-free at any time in the future. This creates more financial and tax flexibility. If you want to use that earmarked money in 5,10 or 15 years, you can. This amount can increase over time.

Imagine the cost of all of your combined out-of-pocket medical expenses over the next 15 years? Now imagine you can use that money, completely tax-free. Want to retire early? Want tax-free money to use? Start logging your HSA expenses today!

It really makes the few minutes to log each expense worth it. In a sense, this money within your HSA becomes a tax-free (and growth) savings account for your personal use.

5. HSA Misnomers

Before we let you go, here are a few common HSA misnomers debunked.

  1. HSAs expire every year and I lose the money. NO! Unlike an FSA, an HSA has no use it or lose it provision. An HSA is a lifetime account in which any money you save today will be there for you.

  2. I can’t use my HSA if I am on Medicare. It is true you can’t contribute, but you can always use existing HSA funds no matter your health plan for qualified out-of-pocket medical expenses.

  3. I have an IRA and 401(k), I don’t need an HSA. Even with Medicare, out-of-pocket medical expenses are expected to be $275,000 in retirement for couples (over a 20 year period). An HSA ensures you have dedicated funds available for these costs. In case you don’t use all of your HSA funds, you can use them just like a 401(k) or IRA, after 65, for anything. An HSA is the new stealth IRA.

Don’t stress about what you don’t know about the HSA. You can learn all of the tips and tricks along the way (and if you need help, just email us). The more you learn, the more you can advantage of the HSA and avoid common HSA pitfalls. Good luck!

Nothing in this post is intended to provide tax advice. Please consult with a tax professional for your specific situation. If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.

Lively

Lively

Lively is the modern HSA experience built for—and by—those seeking stability in the ever-shifting healthcare landscape. By harnessing modern innovation and deep industry expertise, Lively is committed to bridging today’s savings with tomorrow’s unknowns. Unlike traditional institutions hindered by bureaucracy, Lively’s commitment extends beyond initial set up to providing dedicated, ongoing support and education for every step. So each HSA can reach its maximum potential with minimal headache.

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Benefits

2023 and 2024 HSA Maximum Contribution Limits

Lively · May 16, 2023 · 3 min read

On May 16, 2023 the Internal Revenue Service announced the HSA contribution limits for 2024. For 2024 HSA-eligible account holders are allowed to contribute: $4,150 for individual coverage and $8,300 for family coverage. If you are 55 years or older, you’re still eligible to contribute an extra $1,000 catch-up contribution.

comparing hsa versus fsa

Benefits

What is the Difference Between a Flexible Spending Account and a Health Savings Account?

Lauren Hargrave · February 9, 2024 · 12 min read

A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.

Benefits of HSA employer matching

Health Savings Accounts

Ways Health Savings Account Matching Benefits Employers

Lauren Hargrave · October 13, 2023 · 7 min read

Employers need employees to adopt and engage with their benefits and one way to encourage employees to adopt and contribute to (i.e. engage with) an HSA, is for employers to match employees’ contributions.

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.

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