Health Savings Accounts, we’ve talked here before on what 95% of people who have them don’t do to
maximize their HSA. BUT, today, I’m going to show why you want to be part of the 5% of people who
do…and show you how much wealth you can build over time. Real numbers using realistic average
return expectations. If you have an HSA, this is probably one video, you won’t want to miss.
Welcome to Healthy, Wealthy, and Wise where we talk a lot about
improving our financial health. My name is Kevin. For many of you in the community, you like hearing
about investing in exciting companies, so we talk a lot about that on the channel. Now we can get
lucky and hit it big in the market every once in awhile, but for most people, the path to building
real, true wealth is by following a solid plan, day after day, month after month, year after year.
And an HSA or Health Savings Account can be a big part of that: Maybe not as exciting as getting in
early on the next Tesla, but also less risky with a success rate for most people that would be much
higher...and it’s really easier. And if you’re new to the channel, check the video out..and
the links I’ll provide in the description, and if you like it, definitely subscribe,
comment on it, and push that like button and even share with your family and friends,
because I tend to do more videos based on what the community is most interested in…and I won’t
know that unless you do those things. So I’m guessing most of you know what
an HSA is…but if you don’t, I’m not going to repeat everything here because I already
have a video that covers all of that and I’ll link it in the description.
Now if you watch it, keep in mind that it has some of my earlier YouTube work, so I know I
come across a little robotic in it, but what can you do? You live and you learn, right? Pretty
much what we’re all doing on YouTube anyway. Now if you watched that video, we talked about a
lot about how an HSA works, the eligibility requirements, the contribution limits for 2021,
and I’ve even shared my own personal strategy to maximize the benefits of it. And I’m really
proud of that video because the information really has seemed to help a lot of people just from the
comments I received. And I want to give a shout out to Katy who watched this video, got in touch
with me, and asked me to present a webinar for her organization which I really enjoyed doing.
Any time I can help spread the word on something that can really help people, I’m definitely
opening to see what we can do to make that happen. But back to today’s video, it’s based on the data
that I shared in that earlier video about how 95% of people who have an HSA don’t invest the money
that’s sitting in the account. And if you’re in that majority, that’s not terrible because you’re
still getting 2 of the 3 tax benefits that health savings accounts provide. And just a refresher,
those 2 benefits are that, 1. any contributions to your account are tax-free. So it comes out of your
paycheck without being taxed. Or if it’s from an employer putting money into, which is really good,
because it’s not taxed either and it’s like free money, like an employer match in a 401k. And 2.,
that any withdrawals made for qualified health expenses are not taxed…so if you have a medical
expense, you can pull that money out to pay for it, or get reimbursed for it, and either way,
it’s not taxed. So those are both very good things. But it’s the third of the triple tax
benefits of HSAs that are most exciting to me, and again, what 95% of people who have health
savings accounts don’t do and that’s investing the money in their account, because as it grows,
it also grows tax-free. And today, I want to show you the implications of this using some graphs.
And to do that, we’ll looking at 3 different scenarios. Now for each scenario,
we look at what happens to your money over 20 years, so again, it’s not that stock that takes
off and doubles in one day, but it’s that slow and steady approach that really makes an impact. So let's take a look at our first scenario.
okay so looking at our first scenario as you can see on your screen
this is if you put in the max amount for a single person in a year so that would be $3600 in 2021
so looking at this this is $300 a month being put into your account and this is if you choose not
to do anything with it so again this is what 95% of people do they put the money in their account
and they don't do anything with it and they just wait to pull it out later for reimbursement for
health care expenses and so what i want to show you is that over 20 years your total
contributions would be $72,300 okay so that's a lot of money if you look at what the growth will be
at a point zero seven percent and so when how i got that number is really what my health savings
account would would reimburse me for so it's not a great return investment but if you think about
money you have in your savings account that's very limited right now you hardly get anything right
so when you look over 20 years of your 72 thousand 300 dollars it grows to $72,810 and 52 cents
so a little over $500 over 20 years so that's not a great return and in fact you're probably coming
out negative when you consider the the impacts of inflation but also with hsas and one of the the
negative parts with hsa they tend to have some fees with them the fees tend to be a little bit
higher than they are for like a 401k or an ira so you want to consider that so anyways over 20 years
if you just kept your money in there you didn't pull it out um over 20 years you probably would
be in the negative when you count the account fees and inflation so this is again what 95%
of people do um you know this is assuming again you're not pulling out any health care expenses
so while you can see that the money sitting in your account doesn't really grow one point to keep
in mind however is that again it wasn't taxed when it was put in there so that's definitely a benefit
now let's move on and look at a different scenario where again you take the same amount
of contributions which are 300 a month and this time you invest it so again this is
what only five percent of people with hsas do and you can see you have the same seventy two
thousand three hundred dollars taking an uh a return rate of seven percent which is
over the years of the stock market tends to be pretty much there um more recently we've we've
had a lot higher growth but let's just take seven percent because when you invest your money in
in an hsa you have options to be as aggressive or not as aggressive you want to be so let's just say
you take a basic uh you're investing mostly in the the s p 500 um in those kind of funds
and you're getting about seven percent return over 20 years so again that's very acceptable and
that's tends to be the average so in that time frame you can see as your money starts to grow
you know so whereas in the past if if you were just keeping your money in here and not doing
it you would get to that little over seventy two thousand dollars but with your investment
return starting to compound over time you can see that over 20 years your money more than doubles
up to one hundred fifty eight thousand three hundred twelve dollars and ninety seven cents
now again there's some assumptions here and number one is that you haven't taken any of the money out
so all the money that you put into your account you've invested it and it's just sitting there
so again over time over 20 years you more than doubled it so and that would definitely outpace
inflation and that would you know cover any of the fees that you would have from the hsa itself
so let's look at one more scenario where this might be you're not committed to putting the
maximum in every year so in this scenario this is if you put in fifty dollars a month
and so this would be about six hundred dollars a year so that means over the 20 years your
contributions are a lot less just coming in over a little over twelve thousand dollars now again with
taking that same return rate of seven percent that we expected on the when we put a little
bit more money in um you can see that over time again it more than doubles so you go from over
little over 12 000 of contributions where at the end of 20 years you're getting at 26
385 dollars and 50 cents so again you can see the growth that you can get from putting your
money in an hsa and letting it invest and again the biggest benefit of all of this is keeping the
money in there letting it grow we don't need to pull the money out to reimburse you for expenses
but then years later after it's grown having those receipts and then taking the money out
so then you can get it tax-free after it's already grown so you've come out ahead in so many ways So,
some pretty eye-popping results right? Now I know you might be thinking, that all sounds great,
but how can I do this when I’m counting on the money to actually pay for health care expenses?
And to that point, you absolutely can use your funds to pay for qualified expenses…and
depending on your own personal situation, you might have to do this. And again,
you’re still getting 2 of the 3 tax benefits that HSAs provide, so you’re still coming out ahead.
But where I might challenge you is on the less costly items that you absolutely can use your HSA
to reimburse you with, such as prescription drug co-pays, over the counter medicines,
things like that… and just pay out of pocket and don’t use your health savings account funds.
But definitely keep that receipt. Because years later, after the money in your health
savings account has grown tax-free, you can then use those old receipts to take out that
money out without being taxed. Again, I talked about this in that video I linked in the description,
so definitely check it out to see how it’s done, what I do, and how it’s 100% allowable to do this.
And really if you’re relatively healthy and younger, an HSA is something you should definitely
consider while your healthcare needs are low; it could be just a great way to build wealth over the
years. And I know it seems like it’s so far off, but take it from me, like the exponential growth
of the money in your health savings account, the time starts to go by faster and faster.
So what do you think? Did you realize you could build so much money over time with your HSA?
Let me know in the comments. And if you found this video helpful,
please push that like button and share the link with your family and friends on your social
media sites, I mean this is information I wish I understood when HSAs when they came out almost 20
years ago now. But it’s never too late. Again if you want to see more videos on
HSAs or other ways you can build wealth everyday by taking little, easy steps…let
me know with a comment; I’m always looking to grow the community by talking about the
things a lot of you are interested in. Thanks for watching and, until next time, have a great day!