30 sec brief
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…
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.
- 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.
- 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.
- 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.