or is between age 18 and 26 you need to watch this video my number one answer to getting started
on the right foot is always to start a Roth IRA asap if the child has earned income but choice 1a
is to get an HSA started for them a health savings account wait how can you do that
their own hsa i thought only the parents could own the HSA one of those details of this strategy
will stick with me and i'll teach you how you can supercharge an HSA for your adult child
Colin Exelby here and I'm a certified financial planner professional with
over 20 years of experience providing financial planning for business owners and their families
that just make sense i own the financial advisory practice celestial wealth management and provide
advice virtually to clients all over the country now did you know that if your adult children are
covered by your HSA eligible family health insurance they likely can open their own HSA
you heard that right many people believe that only the policyholder can open a health savings account
and that is just not true by reviewing the HSA guidelines a restriction to just the policy holder
does not exist said another way every independent person on an HSA family plan can open their own
HSA and contribute the full year amount now as spouses you must share the family contribution
amount but as an adult child you do not this is a good spot to point out important disclosures
the information in this video is for educational purposes this is not specific financial planning
or investment or health care advice in addition everyone's tax situation is
different you should discuss your tax situation with a qualified tax advisor before implementing
any planning strategy the affordable care act mandated that children must be allowed to remain
on parents HSA insurance plans until age 26 so guess what millions of young adults are remaining
on their parents health insurance plans the good news is if you no longer claim them as a dependent
on your tax return they can open their own HSA and anyone can contribute to their HSA account
that means that even if your daughter is in college and files her own tax return she
can contribute up to 7 300 based on 2022 numbers into an HSA account in her name
that money can come from herself or mom dad grandma or anyone who wants to do it for them
that is pretty cool stuff so how does this work according to publication 969 an eligible
individual is defined as one who is covered under a high deductible health care plan HDHP
has no other health insurance is not enrolled in Medicare cannot be claimed as a dependent on
someone else's tax return the key one is really number four in that an HSA holder
cannot be claimed as a dependent on someone else's tax return unfortunately due to this you cannot
open an HSA for your young child or children and begin savings for them there's a lot of other ways
that you can do it and i've got some other videos about that check those out you have to wait until
they have their own tax return but the first three should apply to most adult children if all four of
these are true your adult child qualifies as an eligible individual even though they're on your
health insurance that means they can open their own health savings account and begin
saving or you can begin saving for them so in addition to your own contributions your children
can contribute up to the family contribution limit currently in 2022 that limits 7 300
now i would have thought if they were single that they could contribute up to the single limit
nope because they are on the family plan you can get up to 7 300 into the account
this is a huge advantage remember health savings accounts are triple tax free junior gets a tax
deduction for the amount that they put in they get tax-free growth and it is distributed tax-free
as long as it is used for medical expenses at any time in their life it isn't locked up as long as
it is used for medical expenses there are many reasons to establish and contribute to an hsa
for your adult children first young adults at this age are just beginning to understand and manage
their own finances teaching them the benefits of these accounts can create habits that have a long
lasting effect second because healthcare is so expensive offer them every advantage they can get
having savings to fall back on for medical care as they go through their 20s can be an incentive to
actually go to the doctor and we all know that young adults feel that they're indestructible
well this helps them and gives them an incentive to get to the doctor and get things checked out
third it gives them a current tax deduction fourth because of the flexibility of these tax advantaged
accounts they don't have many of the restrictions that 401k or IRA money can have so they can use it
much sooner if they need it just make sure they don't forget to file the form 8889 or else they
could be penalized and lose all the benefits of the HSA account that's really important
what a cool strategy this is and a great way to give your young adult children
a leg up if you are looking for additional strategies that may help your family
make sure you browse the other videos on my channel and if you're looking for a refresher on
health savings accounts and the key to unlocking a super secret HSA strategy watch this video next
get clear be clear