Tech Professionals: Are HSAs Worth It?
True Root Financial is a financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.
Think you’re healthy now? What about the unknowns hiding ahead? More people are turning to healthcare planners before even seeing a doctor and it might just save your future.
If you are a tech professional interested in learning how we can help claim your financial independence by investing wisely, minimizing taxes and maximizing your equity compensation, please book a no obligation call here.
As we age, medical expenses can rise unexpectedly, making proactive planning essential for financial peace of mind.
Key Takeaways:
- An HSA allows tax-free contributions, growth, and withdrawals for medical expenses
- You can contribute up to $4,150 (individual) or $8,300 (family) in 2024
- Funds roll over year-to-year and can be invested, building long-term savings
- HSAs are portable, staying with you even if you switch jobs or go freelance.
What is an HSA?
A Health Savings Account (HSA) is akin to a personalized healthcare fund where you can set aside pre-tax dollars to cover a wide range of medical expenses. Remember it’s not just a savings account!
What are the qualified medical expenses?
- Doctor Visit
- Dental and vision care
- Prescription medications
- Yoga and massages ( only if you have a doctor’s diagnosis to back you up to treat any illness)
- Over-the-counter drugs.
An HSA helps cover your medical expenses when your insurance doesn’t.
How does an HSA affect my taxes?
The Triple Tax Advantage
- Tax-Deductible Contributions: The money you contribute to your HSA is deductible from your gross income, reducing your taxable income for the year.
- Tax-Free Growth: The funds in your HSA grow tax-free, meaning any interest or investment earnings are not subject to taxes.
- Tax-Free Withdrawals: Withdrawals used for qualified medical expenses are tax-free, providing significant savings over time.
How much can I contribute to my HSA in 2024?
- Self-only coverage allows for a maximum contribution of $4,150
- Family coverage allows for a maximum contribution of $8,300
- Individuals aged 55 and older can contribute an additional $1,000 as a catch-up
- A couple, both 55 or older, could save up to $10,300 in their HSAs if they max out their contributions.
If your employer adds to your HSA, your total contribution still cannot exceed the plan’s limit. For example, if your employer adds $1,600 to a self-only plan, you can only add an additional $2,550 to reach the $4,150 limit.
Note📝: Be careful not to over-contribute, as the IRS imposes substantial penalties for exceeding the limits.
Unique Benefits of HSAs for Tech Professionals
- Long-Trem Savings and Investment Opportunities: Unlike Flexible Spending Accounts (FSAs), HSAs are not “use-it-or-lose-it” accounts. Any unused funds roll over year to year, allowing you to build a substantial nest egg for future healthcare expenses. Moreover, many HSA providers offer investment options, enabling you to grow your savings through mutual funds, stocks, and other investment vehicles.
- Support For Your Family: With an HSA, you can use your funds to cover qualified medical expenses for your spouse and dependent children, even if they aren’t included in your High-Deductible Health Plan. This ensures that your loved ones are taken care of when they need it most.
- Retirement Healthcare Cushion: Healthcare costs in retirement can be hefty, but an HSA helps you prepare. After age 65, you can withdraw funds for non-medical expenses without penalty(though these withdrawals will be taxed as income), turning your HSA into a flexible retirement savings tool.
- Portable and Flexible: An HSA is not tied to your employer. Whether you switch jobs, start your own tech startup, or decide to freelance, your HSA stays with you. This portability ensures that you retain access to your healthcare savings regardless of your employment status, offering flexibility that aligns with the dynamic nature of tech careers.
- Emergency Medical Fund: Life in the tech world can be unpredictable, with long hours and high stress sometimes leading to health issues. What starts as a small backache can escalate into severe back problems. An HSA acts as an emergency medical fund, ensuring you have the financial resources to cover unexpected medical expenses without disrupting your cash flow or incurring debt.
- Covering a Wide Range of Expenses: HSAs cover a wide range of medical expenses beyond basic insurance, including dental, vision, alternative treatments, and wellness programs. For tech professionals, it offers flexibility for holistic health and wellness care.
Unlock the Power of Your HSA
- Rising Healthcare Costs: Healthcare costs in the United States have been steadily rising, making it increasingly important to have a financial plan to manage these expenses. Tech professionals, who often earn higher incomes, may not qualify for many healthcare subsidies, making an HSA an essential tool to mitigate these costs effectively.
- Enhanced Financial Planning: For tech professionals, especially those who are financially savvy and interested in optimizing their wealth, an HSA offers another layer of strategic financial planning. It complements retirement accounts like 401(k)s and IRAs, allowing for a more diversified and robust financial plan.
- Mental Health and Wellness: Tech professionals often face unique health challenges, including mental health issues like stress and burnout. Many insurance plans have limited coverage for mental health services, but HSA funds can be used to cover these costs, ensuring you have the resources to take care of your mental well-being.
- Tech-Savvy Management: Many HSA providers offer user-friendly online platforms and mobile apps, making it easy for tech professionals to manage their accounts. These tools provide real-time access to account balances, investment options, and healthcare expense tracking, aligning with the tech-savvy nature of the industry.
Should You Use Your HSA or Pay Out of Your Pocket?
When deciding between using your HSA or paying out of pocket, consider your goals. Paying out of pocket for smaller expenses lets your HSA balance grow tax-free, potentially boosting long-term savings. Use your HSA for larger or unexpected costs to avoid financial strain. Balancing current expenses with future savings is key.
Here’s the Next Step for You
To leverage the advantages of an HSA and build a robust financial foundation for future health needs, choose us as your financial advisor. Book a call below today.
Leave a Reply
Want to join the discussion?Feel free to contribute!