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Get the Most from Your HSA

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
August 19, 2022 5:30 pm

Get the Most from Your HSA

MoneyWise / Rob West and Steve Moore

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August 19, 2022 5:30 pm

Financial advisors will tell you that a health savings account is a great way to meet medical expenses.  But even if you’re eligible, an HSA may not be your best option. On today's MoneyWise Live, Rob West will explain some details about HSAs and help you decide if having one is a good fit for your financial situation. Then he’ll answer your questions on various financial topics. 

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Advisors will tell you that out. Savings plan is a great way to meet medical expenses, mostly true, Rob West. If you qualify for an HSA you want to make the most of it. But they're not right for everyone. Talk about where they do the most good and where they'll have little impact on your budget that's on your calls at 800-525-7000 800-525-7000. This is moneywise live biblical wisdom for your financial decisions.

Okay, so there's no disabling medical expenses and reduce your tax liability. Money goes into the account tax-deferred and you can use it tax-free for qualified medical expenses.

That's if you qualify to be eligible for an HSA, you must have a high deductible health plan or HD HP. That means in 2022.

Your deductible for medical expenses. The point where your plan kickstand must be at least $1400 for an individual or 2800 for a family if that's you, you want to take full advantage. As I said in HSA is a great way to accumulate tax-deferred savings for medical expenses and get this many financial advisors will tell you that it's also a terrific way to save for retirement for some folks. That's because at age 65.

The penalty for using the money for nonmedical reasons goes away while money used for medical bills is still tax-deferred. So there are real win-win. But again, only for some people if you withdraw money from a retirement account after age 59 1/2 your text on it, but you don't pay a penalty. You can use the money for anything, but you do pay taxes on all of it no matter what you use it for with an HSA after age 65. If use the money for nonmedical expenses you're still taxed. However, at that age, you'll probably have more medical expenses than you would. Earlier in life when you use the HSA money to meet those medical expenses. It's tax-free.

So in that sense it's better than a conventional retirement plan. It's a double dip. Now who's in that fortunate group.

While these are folks who don't need to tap into their HSA funds all the time for short-term healthcare.

They're in a position to stockpile that cash for retirement.

In addition to other qualified plans, like a 401(k). It's such a good deal that some advisors will actually tell those individuals to pay medical bills out of pocket so they allow the money in their HSA to gain compound earnings for retirement.

This group typically has low medical expenses and rarely reaches their health plan deductible there usually young and have the opportunity to accumulate more money over a lifetime.

So this group can maximize their HSA's potential by investing the money in mutual funds or stocks and not spending it. HSA's are not like flexible spending account so the money keeps rolling over from year to year with compound earnings. By the way, you can contribute to an HSA up to $3650 for an individual and 7300 for a family in 2022+ an additional $1000 for people 55 or over. So that's great for folks in that group. Young, healthy and able to contribute the max to their HSA for years and years, but they happen to be in the minority. What about other folks well most people who qualify for an HSA fall into a large middle group and they still want to take full advantage of this opportunity there folks who have to tap into the account to meet their medical expenses.

In fact, more than half of HSA owners exhaust their total balance every year but that's okay and it's really what the HSA was designed for their able to take advantage of the tax savings. The money they put in and use for medical expenses is tax-free, so it's still a good deal even if the account never builds retirement savings.

Now that still leaves one group who might be eligible for a health savings account that is they have a high deductible health plan, but they're still paying a lot out of pocket for them. The health savings plan by itself will be much help. What they really need is to get on a plan with lower deductibles that you it might mean paying more in premiums but you can shop around for a plan that will nickel and dime you to death after meeting Dr. no matter what your medical costs are.

You can also think outside the box and contact our friends in Christian healthcare ministries. They have medical sharing plans that could save you a bundle while meeting your healthcare are your calls or next. 800-525-7000 before you know you understand. Moneywise my questions with lines open 800-525-7000 Gabby T managing her phones today should love to hear from you and will get you on the air quickly again.

800-525-7000. We have several lines open.

I'm thrilled you're here today because each afternoon as we gather together this hour, we have the privilege of exploring what God's word has to say about this area of money management. Our goal well to be found faithful as stewards of God's resources as we think about the daily interactions we have with money, which there are plenty of them. But here's the ultimate reality is that money issues are hard issues member Jesus and where your treasure is, there your heart will be also so about this. Your heart follows your money is not the opposite M I've got a son going off to college and not too far off my part will be at that university. As my money goes there and that's true about everything. We spend our money on, including our giving, and so if money tells a story, or the way we handle it tells a story of what's most important to us how we feel about the story that were telling do we want to make some changes. Well, it has to start on her knees, saying, Lord, what would you have me to do with what you've entrusted to me and then we go from there. Whatever your question is today. We'd love to help you explore it and see how we can help you move forward with that 800-525-7000 is the number to call. Let's begin today in Cleveland, Ohio.

Jeff your first color, go ahead sir yeah taking my call so I have not filed an extension for my taxes so I have not filed them for 2021 and is wondering if I can still contribute to a Roth IRA for 2021 yeah unfortunately no just in the same way that if filing an extension does not delay your requirement to pay the taxes that you owe by the original deadline. It doesn't delay the contribution deadline for a retirement account like an IRA either. So it's only a delay or an extension on filing the paperwork but if you don't pay anything, you know you're going to pay interest on it and penalties and the same is true about the IRA. That deadline is up until you file or April 15 or whatever the filing deadline is for that year okay right thank you very much appreciated. Jeff, thanks for going to Indiana W MBI, Michael, Karen Hetzer. I heard you talk about radio and my understanding is that light have a living trust and my wife is weak and after each one of us and that maximum there. I'm wondering the one you reported in the same place or the yeah so you have those individually in your name and you'll report the Ivonne interest when you redeem the bond. That's the only time you have to report it and you'll find the amount of interest received on your I bond in box 3 of the IRS form 1099 INT which is for interest, you get one of those if you earn at least $10 in interest and then you would report that on the 1040 or 1048 whichever one you use on the appropriate line of years the 1040 EZ report savings bond interest on the line to, but regardless you would report that on the appropriate line.

Depending upon which 1040s you use in the amount that you get would be on that 1099. If you were to get multiple 1099s than you would. You obviously total that up as you file that return jointly sugar and and see the annuity I added the out elderly on that only $20-$30,000 left and all I know you wanted a payment of about 4000 something a year and it would take over 20 years. I maybe reach out that all amount and I can actually I think better life. I want yeah you know I mean there's several moving parts. This will make sure you understand the implications from a tax standpoint. Otherwise, but you know I would tend to agree. I think this is why I'm not a big fan of annuities. Often you can do better by investing in a nocturne insurance product but just straight investments in a properly diversified portfolio. So I think you're putting your finger on something. It's important here that you know, given that the payout, the annuitization would take 25 years or so to get to what you could receive as a lump sum now and you could take that and deploy it and perhaps you'll do better over the long haul.

Obviously, you're assuming the risk and that but I tend to agree with you that I'd rather have control over my money and be able to direct it as I see fit and realize you know the full potential of the upside between now in your whatever point the Lord calls you home in the future and still have your principal to boot which you could tap into if you needed more money or you pass that on. As an inheritance or given away when you're when you pass away. All right, Michael, God bless you, but we appreciate you going 100 525 7000s number to call quickly to Brainerd, Minnesota Craig, you're next on the program. Go ahead and provided a very yeah well I will work on registered I need to do to make sure that yeah it's a great question. You know it's probably similar Craig to use of these online services that will allow you to create a will, very low cost. And if you have a real simple situation certainly can be effective. I think you know the other approach would be, which is what I would take typically recommend for three to $500 to get an attorney to weigh in on it and you know you can have them review in the probably just say listen, I'll just create one myself for that three to $500 and make sure that they know can ask you several questions understand what you're trying to accomplish. Make sure that it's valid for your state and make sure you have what you're ultimately looking for. Does that mean there's something wrong with what you have just because it was provided free. No, I don't think so, but I think this is one of those things where is the last stewardship decision you make.

It's worth having some competent counsel to look over it and make sure that you know it's not only valid but it's addressed everything you want to do. Obviously one mistake in a will could cost way more than the attorneys fees. So I think that would be the other alternative but if you say now I'm comfortable with it. I got a simple situation.

I got something in place and filed I'm good.

Apart from that, I probably have an attorney take a look at it and either just review and give you an opinion or draft a new one that could be updated every couple of situation changes.

That's a great think we got several lines open today would love to hear from you. This break will be thinking anymore of your questions number: 800 557 with us today and moneywise, my decision to consider a gift of money wisely. Listener supported is a nonprofit ministry doing as a result, generous support and beyond giving your local church. If you would consider a gift would certainly be grateful you can head to our website just click the give button you'll find a way to give online over the phone or through the mail. Again, the gift to moneywise media is tax deductible and would certainly be grateful for whatever you can do just click give eggs in advance puts it back to the phone so again a few lines open maybe two or three, 800-525-7000 is the number to call to Cleveland, Ohio Emmanuelle, thank you for calling the redhead. I think my call. I have a student loan date. It's not actually I was so close to accept the reward for my hand for my foot so much and then I put some of things I just forgot I did not accept the reward and I have a debt of the grand right now, and in next missed on resumes the 29th of this month I have to pay that just like I graduate in December the right thing for me to do to take out private student loan at this time because if I say I should pay going to the code now anything you can only maybe for the end of the I'd want to touch my savings my life so that's not right now.

I just went on with the best shot. Yes, so would you actually refinancing a loan or this is a bill that's unpaid at this point it's on P okay so you're going to owe this amount by what time what point do you owe this. I already will eat okay your deal and now it's due currently and yeah, you're wondering how you should go about paying it.

Do you qualify for federal loans. Yes, I do okay and why are you thinking private over the federal loan options because the federal loan option will not Meco for my summer classes anymore. This time it's neat, classy radical to school and like I can do that anymore.

It only gonna apply for my phone and Mr. I see. Yes, and nothing that's already been in the past, but you can use private student loans to pay in arrears. Is that right for expenses you've already incurred is what you're saying yeah can I do that in the possible yeah that's a good question. I would check with the private lenders I suspect that you can do given that that's what it's for and that this amount is owed and it can be paid directly to the school. The downside of the private loans is typically have a little higher interest rates can be driven by your credit worthiness in your income but then also you don't have the flexible repayment options, but I certainly understand that you don't want to chew up all of your cash that you have available so I would go that route. You can look for the best private lenders online and find out where you you might want to go so far. I would be want and there's a number of them now, but I'd do a bit of research. They're all rated differently, but I probably look there first.

Emmanuelle, I think the key would be to make sure you have a repayment plan. This can allow you to get out from under this within 10 years. Let's not string it out any longer than that but and then obviously as you have resources available through your job and so forth. I try to really prioritize getting that payback just as quick as you can. But beyond that, I think this is certainly a good option to look at how you would get that covered moving forward if you need to do additional borrowing, try to minimize as much as possible, but I probably look at the federal loan option in the future. I think you're not really I you're very welcome. God bless you my friend Orlando, Florida Eugenia, thank you for going go ahead and will be 66 here and I didn't rob myself. But I'm wondering should I not going take that income and put in our because I don't have that much in my 401(k) working yeah I'm working full time yet to work about another two years. Yeah well I think the key here is how does it make sense to going take it if you don't need it and put it in that IRA versus just letting it continue to build up see if you don't need that.

You can let this continue to grow until age 70 and that monthly benefit check that Social Security benefit is going grow by 8% a year and that's a guaranteed 8%, which the stock market return is not going to be a guaranteed increase of any amount so I think that's the benefit there and you're in a situation where if you're healthy, you have the ability to continue to work Eugenia and you don't need this money. I like the idea that you would let it continue to grow by 8% a year. Now you're giving up the ability to collect that money month after month until you start collecting at some point in the future and there's got to be a period of time where you're going to have to you know wait to make up what you've given up by not taking it earlier. So for example somebody who waits till age 70 to start taking Social Security at Noah rates. You probably 18% higher than they would have at 6724% higher than they would at 67.

It's going to take them about 11 years of benefits where they've made up with. They didn't receive between 67 and 70 through that higher payout but then from that point for the rest of their lives they get that higher check so I kinda like that option a little better for you read, say, not knocking to get just to let it grow by 8% a year and then by all means when you retire or you need the money. That's this time to start collecting it. Does that make sense all right Eugenia, we appreciate you go that I got bless you and hundred 525-7000 is never to call your folks as we think about managing God's money. Here's the key we want to live within our means. We want to avoid that. But I have some margin margin is something left over after the bills are paid to set long-term goals.

We also like to give generously difficult times to break the grip of money over realizing much more to come. Just around the corner moneywise with us today and moneywise lives we apply God's wisdom to your financial decisions and choices back to the phones we go to St. Louis, Missouri.

Mary think Mary and ex-military and I get disability. I have my 401(k) gold and silver and transferred it over there but I still have like a balance of 30+ thousand two in my 401(k) now that but my player. I have now so I have $25,000 credit card debt and I was wondering if I should take the 401(k) balance my credit.

Yeah, I mean, I'd love for you to get rid of that credit card debt, especially now Merryman is variable rates and credit cards are really climbing in light of what's going on with interest rates right now so you said to me the rundown you got 25,000 in credit card debt and then what are the various assets that you have available a heart rate 35,000 and 40,000 gold and silver and inside retirement plan. Yeah it switched over from the 401(k) to whatever gold asset is IRA like old IRA yet and then what other assets do you have available. I did have some crypto okay you have any openings probably about us now and okay all right then, what are your income sources right now. I have a full-time job and I am also getting my military retirement and and disability. Very good. And when you look at all of those do you have any margin left over at the end of the month. After all the bills are playing a little that I now can I try to make extra payments on the car after yeah yeah well I think that's the key. You know I would rather you do a couple things I think, hear me number one euro versus 59 1/2 soon I can have a penalty so you could pull this money out to swipe out the debt. The challenges that can leave you with very little for the future and it's all gonna be taxable to you soon to be added to your taxable income for the year and could bump a portion of that up into a higher bracket so that's number one. Number two is I you know really love for us to preserve that and so the other way to approach these credit cards is through what's called debt management where you work your credit counseling agency. We use Christian credit counselors. They're just wonderful. They worked with thousands of our listeners and they help folks get out of debt. On average 80% faster because what would happen is the card to be closed. They put in be put into the debt management program you pay one fixed monthly payment for repayment in the interest rates would be adjusted lower it will vary depending on the card but they'll come significantly lower which allows you to send the majority of which are sending each month toward principal and not interest, and then you could let that 401(k) keep growing.

I'd rather it not be all highly concentrated and precious metals, though I think that just give me a little more volatile and not as good a long-term performance, historically speaking. I'd rather see put that into a properly diversified stock and bond portfolio and the key is just to live well within your means.

I'd love for you to take any margin that you have above the monthly payment to the debt management program and build up an emergency savings equal to 3 to 6 months expenses so I'd try to get that thousand dollars up to whatever your expenses are times three your time six somewhere in there so that when you have to fall back on something for the unexpected. It's not taking on more credit card that you're able to cover that out of your savings we break the cycle of the credit cards and get out of debt once and for all. My fear is that not only would pulling from the 401(k) be expensive because you got the tax on top of it, but it may result in a temporary solution that doesn't resolve the real underlying issue which is we really need to dial back spending to free up more margin and you might call me in six months is a guess what Rob the credit cards are back and maybe it's not 25,000 maybe it's five or 10,000 but I think we gotta break the cycle, to the extent this is still an issue of living beyond your means, so that would be my preferred approach Mary is to use the debt management keep the 401(k) intact get that rebalanced in terms of the investment strategy and then really focusing on building up the emergency fund. Give me your thoughts. Now that I have from time to do a startup wasn't just lifestyles and sure now. Yeah, and the challenge with those are as you probably have experienced and he said no nothing about what you start a business. Since just talking generally here but the challenges it often takes more money and more time than we think.

To get a business up and running and it can end up being kind of a money pit that we just think money more more money into an and if we don't have the financial kind of foundation to draw from to get that business started and do it in a way that's actually no good to get it launched properly when were trying to banded together with with credit cards that's you know can be a real challenge as well. Do you have reason to believe you that is gotta be successful in the near term. I think Sal actually I've got a few sales already starting to come.

So I don't expected to go overnight but inside growing the challenges just doesn't sound like you really have any way anything in the way of reserves and that's just a little bit of a difficult spot to be in with your admin got a new business start up so you, right up to the edge there in terms of nothing to fall back on, especially the 401(k) is gone now. We really don't have anything. It really is only credit cards that we have as an option there so I I think I would go this approach get on a monthly payment with Christian credit Take another look at that to gold Iran look at getting a different investment strategy there and just try to build up reserves as quickly as you can so that you know if the business doesn't materialize as quickly as you think we broken the cycle of having to get use credit cards to fill in the gaps will certainly ask the Lord to give you some wisdom. I know these are not easy conversations or decisions to make, but I'm confident you make the right why Mary. We appreciate your call today a quick email we receive emails all the time from our listeners were so thankful that we do this one comes from Andrew he says Rob thank you for your valuable ministry. My wife and I both work full time and our house is paid off. I'm 60 she's 62. I have no dependents except for my wife. Do I need life insurance and I would say not necessarily Andrew, your wife may be able to support herself while she's working. But the question is, would her income and then the asset you've built up be enough. Your income was taken out of the mix. If not, then there's probably a place for maybe a 10 year term policy between ages 60 and 70 as long as you're on track to build up those assets of the when you drop that at age 70. It's no longer necessary and she can depend upon your investment assets to cover her needs for the rest of her life. The Lord will call you home so that's the key.

If you are you happy assets and she's happening on your income that I think you can drop it right away, moneywise right back. Thanks for joining us today. I moneywise lied biblical wisdom for your financial decisions. Check out the moneywise app if not downloaded today in your app store search for moneywise biblical financer go to the app tab you can manage your finances connecting your institutions build your budget you can access or broadcast archives and all of our great content. You can even post questions the moneywise community to respond to. It's all there in the moneywise applicant is click The top of the page are back to the phones we go Longview, Texas, Linda, you're next on the program. The redhead all no Medicare supplement insurance plan for years and years and nine considering taking the Medicare and manage they are telling me I don't have to pay anything for it and I'll get okay wrapping paying $280 on my by the other.

I did not use my insurance very much now I'm just wondering if it tended to be treated relation or is it something that I sent person is something to look at in the key was what you said there at the end you don't use it very much if you're generally in good health and advantage plan may be best, where the supplement may be cheaper in the long run is if you go to the doctor a lot reason is an advantage plan will cost less in a Medicare supplement. They replace parts a and B and most include part D for prescription drugs and they have zero premiums beyond what you pay for Medicare out of your Social Security benefit. They do however have co-pays and out-of-pocket costs, whereas the supplement plans work with the original Medicare parts a and B and don't have the out-of-pocket cost. You can have with an advantage plan. So I think from that standpoint because you know you're in good health.

You know, the advantage plan may make sense because you know you have zero premiums really need. Dr. Max point don't have handle our eye or ear, or any abandonment to cover at least part of yes yes that is worth looking into. I'd probably talk to and somebody who really specializes in this. Just to make sure you thought it all through, but generally speaking I think what you're hearing is correct and I think in your situation, this would probably make a lot of sense for you so I definitely take a look at it. Linda would appreciate your call today. God bless you, Clearwater, Minnesota. DN thanks for calling the redhead and how you doing today I doing very well, thank you for going out. If you turn down you just redhead which Delbert brought anything like an Jerry and stepbrother. By the way, and he married but I don't believe he had a well spell automatically and go see you his current wife yeah well if you died without a will, easier to shoot what you would receive what's considered an intestate share.

So then test it just means there is no will and so the question would be, you know how the probate court is going to decide who gets what.

So, for instance, it would go to living children and the science of each child's share depends upon how many children there are. Whether or not there married, and whether your spouse is also apparent, and so forth, or whether this your spouse is also their parent and whether your spouse's children from another relationship. So I did as you said, it does get complicated given you know how many people are involved here. If it's a stepmom you're talking about.

She would inherit the first 225,000 of the intestate property plus half of the balance and then your dad's descendents would you be you and your siblings would inherit everything else. But again it it does get kind of complicated.

There had have you all been in touch with the probate court with regard to how all of this is going to be administered well. I probably eight years it out and we were never contacted by the probate heart by any lawyer nor anything and I'm thinking about getting more better over time.

Not bad. Eric and just wondering you know why is it handled appropriately and you know I'm her and did they see consider Everett you know the entire family in the process she never had any other time so I doubt that she did admit well you say be something worth looking into.

Maybe there was a will and I think that's the other option here, but if there wasn't, the court would normally step in and make those decisions. So it sounds like you know a little bit more digging is probably in order just to find out exactly what was in place and what decisions were made and why. You could seek your own counsel that you perhaps could help you navigate this because obviously this is foreign territory, and it sounds like a pretty complicated situation. So I think if you're wanting to explore it a bit more. I would probably find an attorney that could work with you to do a little bit more digging into exactly what went on, and why you assets were distributed. The way that they were right. Finding out you know what statute of limitations that are yet I do not yes it will happen is to start the probate process of the petition would be filed for letters of administration and that would let the court know they have to appointed administrator to distribute the assets of the estate and then that process begins. From there, so this should all be able to be no explored and understood as to why decisions were made that they were, but certainly I think would behoove you to look into it and see exactly what went on there.

Sorry that I know this is complicated and relationally it can create some challenges here for sure among family members. So will as Lord to give you some wisdom. DN as you navigate this.

We appreciate your call today to Kalamazoo, Michigan Diane, thank you for calling the redhead. I hear first draw like to hear any sound that I don't know the path ability to be getting only one distribution yes no light can be taken in one lump sum or spread throughout the year.

It just has to be distributed.

The total amount of the required minimum has to be distributed by the due date.

Now the portion that you want to go Diane to charity you want to do through what's called a qualified charitable distribution where you don't recognize the distribution first and then give it away in action goes directly from the root retirement account to the ministry are charity and that's credited toward the RMD that it's not added to your adjusted gross income so that would be beneficial for you from a tax standpoint and for the ministry because they get the full amount in whatever portion you send would go against your RMD for the year and then you just have to be sure to take the rest of it that you want for yourself are able to meet if I take it all at one time and hopefully get tax credit when our taxes done that I yeah absolutely. The key is just that he gets out by that deadline. The full amount. It doesn't have to be done all at once, that's for sure. So hopefully that helps you and I think I qualified charitable distribution could be a great tool for you as you think about this, so I would certainly check that out.

You want to talk to the custodian of your IRA to get that done, but that we appreciate your call today.

Diane God bless you. Let's head to Florida actually Milan thank you for calling your next in the program, go right ahead right now and currently living with. I'm renting a room from her and I feel like it's time for me to get my own place. I currently hold onto your life and he even learned behavior outside my remake K I'm not crying for me to get my own, so the average price of an apartment right thinking about lowering my deductions and find my phone K right now I'm contributing my company matches 100% up to $500 a year thinking about getting my paycheck 2000 every two weeks so I can be able to afford all that my question I put like line on entry. My so what you're talking about with with regard to the dependence and so forth. The deductions would have to do with how much taxes withheld in the key there is to make sure to fill out the IRS form follow their you know formula so you have the right number of right amount of taxes withheld.

The goal being that you don't owe anything at the end of the year, but that you're not getting a big refund either with regard to the 401(k) that has nothing to do with that form you just tell your employer how much you want without it so you'll just go back to your employer and say listen, I want less taken out. You tell me exactly what percent of your check you want taken out and you can take it from 18%, way down and I think you're right. Now is the time to time not to be thinking about saving for the future, even though that's important now is the time to be getting enough in your check so you can live get your apartment and build your budget in such a way that allows you to provide for you and your son so I go talk to your HR department have them use the amount being withheld for your 401(k). Thank you so much for calling today is a partnership between moneywise and as as well as Jim

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