I used to think an HSA was just a special checking account god I was so
stupid cuz an HSA is so much more than
that I never maxed out my HSA contributions I
never invested my HSA and I missed out on some huge tax savings and potential
investment gains but last year I opened an HSA again and this time around it's
gonna be different because now I know how to actually make the most of it in
this video I'm gonna briefly touch on what an HSA is and how it works then I'm
gonna talk about how HSAs work specifically at fidelity I'll also talk
about how to prioritize your HSA versus other accounts like your Roth IRA and
your 401k and last but not least I'll talk about how to invest your fidelity
HSA for maximum profit obviously I can't tell you what to invest in because
you're an adult and you can make your own decisions but I will show you how
I'm investing my fidelity HSA so you have a real life example of what it
could look like for you so if you're interested in learning how to be smarter
with your HSA and to make sure you're getting as much benefit out of it as
possible then keep watching ok let's start off with a little HSA 101 the HSA
stands for health savings account the name is kinda misleading because health
savings account sounds like a bank account and that's
why for the longest time I didn't know that you could invest your HSA but HSAs
are actually not bank accounts they are full-blown investment brokerage accounts
and they're designed specifically to help you invest and pay for health care
with pre-tax money HSA is come with some really awesome tax benefits in fact I
think they're the ultimate investing tax loophole because they give you a tax
shelter in three instances you make pre-tax contributions we have tax-free
growth and you have two acts free withdrawals as long as those withdrawals
are for health related expenses compare that to the traditional IRA traditional
IRAs allow you to make pre-tax contributions tax-free growth but not
tax-free withdrawals and then the Roth IRA you make after-tax contributions
Shen's tax-free growth and tax-free withdrawals so the traditional and the
Roth IRA they offer tax shelters in two out of three instances whereas the HSA
gives you a tax shelter in all three instances if you could use a helpful
guide on how the HSA compares to other types of accounts then download my
ultimate guide to IRAs 401ks and HSAs it took me a long time to finally
understand the difference between all these different retirement accounts and
also it took me a while to understand which ones I should prioritize in my own
finances so to make it all easy for you I've packaged everything I've learned
and created this PDF that summarizes the benefits of each account there's
examples recommendations on which ones you should open as well as where to open
them it has literally everything you need to know to set up your accounts for
maximum profit so click the link below to download it okay so back to HSAs HSAs
are not substitutes for health insurance they are an account that you used in
addition to your health insurance and that insurance plan has to be one that
allows HSAs when I want self-employed I was shocked by how expensive health
insurance is if you don't get coverage from your employer that's why I went for
a really cheap insurance plan that allows HSAs because with my cheap
insurance plan I pay low monthly premiums and if then when I do need to
go to the doctor I can pay for it out of my HSA what's cool about HSAs offer net
fidelity is that they're the most flexible HSA provider that i've seen out
there with a fidelity HSA you're gonna get access to the full range of stocks
bonds ETFs mutual funds and investment products offered at fidelity this is
great because many of the other HSA companies out there such as HSA bank and
devenir only give you a very limited menu of investments to choose from I
don't really like that I don't like being limited so I definitely appreciate
the flexibility of my fidelity HSA a fidelity HSA is like a hybrid between a
checking account and a brokerage account so as long as you have cash in there
that's not tied up in stocks and bonds and other invest
you can use it like a checking account you get a debit card that looks like
this and you can just swipe it to pay for
doctor visits contact lenses prescription drugs and things like that
that's why I invest my fidelity HSA a little different from how I would invest
say my fidelity Roth IRA because unlike my Roth IRA which I'm not gonna touch
until I'm much older I actually need to spend some of my HSA right now on an
ongoing basis so that's gonna change how I handle my investments a little bit so
when you have X amount of money left over at the end of the month to after
you've paid all your basic bills and rent you have a lot of options for
example you can use that extra money to pay down debt put it in your 401k put it
into a Roth or traditional IRA you can just save it in a bank account or you
can invest it in a taxable brokerage account or you can put it in your HSA so
where does the HSA fit in with all these different priorities here's how I think
of it when you're trying to decide where to allocate your money there's two
considerations first of all where can I get the highest after-tax return on my
money I'm always thinking about after-tax return the second thing is
when do I need to access that money that's the second consideration so if
I'm looking for highest after-tax return on my money then the obvious answers are
I want to prioritize any type of tax advantaged investment account like HSAs
401ks and IRAs but then the downside of that is that with accounts like those
your money is more or less locked up until you retire so if you want to
invest and save money to buy a house then an HSA or an IRA probably isn't the
place to do it I think the question you need to ask yourself is what's your
number one financial goal right now if your number one financial goal right now
is to save up to buy a house then probably your HSA isn't the most
important thing in your list of priorities for me right now my number
one financial goal is to get the highest after-tax return on my money so that I
can reach a 1 million dollar net worth as soon as possible I'm also ok with
having that million dollars in accounts that I can't access until I'm retired
because I'm not planning to touch that money anyway I have other sources of
income in the mean time so for me I prioritize
my HSA and my Roth IRA the annual HSA contribution limit for 2020 is 35 50 and
then for 2019 it was 3500 I always always try to max
out my HSA before I max out anything else even over my Roth IRA that's just
me though a big part of investing is taking taxes into consideration taxes
will eat up at least 20 to 30 percent of your investment earnings but with the
HSA and it's triple tax shelter you don't have to worry about any of that
although I don't know your exact situation and you may have different
financial priorities than me I would say the HSA should be pretty high up there
on your list of priorities you don't invest with the right accounts you're
gonna end up paying way more taxes than you need to on your investments so don't
forget to grab my ultimate guide to IRAs 401ks and HSAs
to make sure you're not leaving any money on the table and that you are set
up with the right accounts the download link is right below this video in the
description and finally let's talk about how to invest your fidelity HSA you
don't have to invest your HSA you can use it as if it were just a straight
checking account and spend your health expenses out of there or you can use it
as a wealth building investment vehicle and then you can also use use it for
both which is exactly what I do so as I mentioned earlier the contribution limit
for 2019 for the HSA was $3500 so what I did was I divided this amount by 12
which gives me $290 and then starting January 1st of 2019 I started making
automatic monthly deposits of 290 so that way I know that by the end of the
year I would have made twelve deposits of 290 each and that would have gotten
me to my HSA max of 3500 for the year as for investing that money I used the
fidelities automatic investing feature to set it up so that my monthly deposits
automatically buy more shares of some of the index funds that I already own the
key here is that the index funds need to be mutual funds and you already have to
own them if you want to automate your investments then you have to first buy
the investments and then set up the automatic feature with those investments
that you already own if you want some ideas on which in
funds to buy for your fidelity HSA in the first place check out this video
right here it goes into a lot more depth about how to pick the right funds and
it's really good so definitely check it out so anyway back to my $290 monthly
HSA deposit as soon as that money from my checking account hits my fidelity HSA
I set it up so that $200 of it goes automatically towards buying more shares
of the index funds and then the remaining $90 stays in cash
I did that because I want that $90 every month to keep accumulating so that the
next time I need to buy more contact lenses or pay for a doctor visit I can
just swipe my fidelity HSA debit card without having to sell any stocks to
cover that expense so next year I'd really like to get LASIK so I'll
probably cut back on the amount that I automatically invest and keep more of
that $290 in cash so for you if you know that you have some big medical expenses
coming up in the next year or so whether it's having a baby or getting a surgery
or just getting LASIK like me then feel free to use your HSA like a savings
account so you don't have to invest it in fact you probably shouldn't invest it
because the stock market is a place for people with long time horizons in case
you haven't noticed by now I'm a big fan of fidelity because in addition to the
HSA fidelity offers all kinds of other accounts and services for all your
financial needs not only do I have my HSA at fidelity but I also have my
everyday checking account there I have my Roth IRA there my step IRA and at one
point I even had a fidelity credit card something that really helped me in my
financial journey is having all my accounts in one place because it kept me
organized and it was a lot less work to manage I know many of you have an old
401k lying around somewhere from a previous job and one of the smartest
money moves you can make right now is to roll over that 401k into an IRA so that
you have all your finances in one place like I do in next week's video I'm gonna
talk all about how to do a fidelity rollover IRA so if you're thinking of
rolling over your 401k to consolidate all your finances at fidelity then I
want you to subscribe to my channel and hit that note
so you don't miss that video that's it for now thank you so much for spending
this time with me I appreciate you I appreciate you I appreciate you I post
new videos every Wednesday so I'll see you next week same time same place and
don't forget to download my ultimate guide to 401 k's HSAs
and IRAs remember to invest early and often and to boldly and courageously go
after the life that you want