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At Whitaker-Myers Wealth Managers, we all have the heart of a teacher, and it’s important that we consider all financial planning instruments and strategies for our clients. Due to the historical lack of awareness and knowledge with Health Savings Accounts (HSAs), it’s also important that we educate on what HSAs are, who is eligible to open and contribute to one, and why it could be a beneficial financial planning tool for specific clients.

What is a HSA and who is eligible?

A health savings account is a triple-tax-advantaged investment account that can be used to pay for qualifying medical expenses before and during retirement. The general rule of thumb is: those who qualify for a HSA are individuals or families with a high-deductible health plan. More specifically, a HSA-qualified consumer driven health plan with minimum annual deductibles of $1,400 for individuals and $2,800 for families. If one were still unsure if they would qualify or not, it is spelled out in a little more detail on our website.

Features of a HSA with Whitaker-Myers Wealth Managers

We believe that a HSA can be thought of as a triple-tax-advantaged account that can act as a hybrid between an emergency fund and investment account. Historically and even today, most health savings accounts pay a low annual rate of interest that does not keep up with inflation, let alone the rising annual costs of healthcare. Not to mention, many potential investors are left out of this knowledge and opportunity due to the unfortunate nature of many investment advisors not wanting to put time and effort into educating and working with people who are not extremely high-net worth clients. With your eligibility and our financial planning & investment management capabilities, we can offer the accessibility of a health savings account along with the availability of high quality mutual funds with long track records that will allow your contributions and account to grow over time, with fund recommendations being based on clients’ risk tolerance and time horizon among all other factors. Finally, what is this triple-tax advantage that has been mentioned twice already? To put it briefly, contributions are funded pre-tax, the account grows tax-free, and distributions for qualifying medical expenses are tax-free. Qualifying medical expenses include most services provided by licensed health providers, in addition to diagnostic devices and prescriptions. Even acupuncture and substance-abuse treatment are two specific examples that would typically qualify.

Putting your HSA to use

As mentioned above, qualifying medical expenses will always be tied to all 3 tax-advantaged features. The great thing about a HSA, that is not also present in other investment vehicles and insurance products, is that the account is YOURS, with no strings attached. It is important to mention limitations, but that essentially only includes the 20% penalty that would be tied to non-qualifying medical expenses before age 65 and the annual contribution limits. Current annual contribution limits are $3,550 for individuals and $7,100 for families, with a $1,000 annual catch-up contribution at age 55. However, once you reach age 65, a HSA is treated like a separate IRA account where distributions can be taken out for essentially anything, medical or non-medical. With this feature, you were still free from taxes with the contributions and the growth of the account. Post-retirement, qualifying expenses will still be taken out without any tax, still giving the triple tax savings. We believe these features give credibility to the fact that HSAs offer amazing tax advantages and flexibility with usage.

Not-so-fun facts

One other aspect of HSAs that we can agree on is that this isn’t the most glorious or thrill-seeking form of investing and financial planning compared to thinking about something such as purchasing a vacation home, but neither is paying for costly medical expenses or bearing the burden of financial disaster with extreme cases. Here are some specific facts and statistics that can help reiterate this:

  • The average couple today needs almost $300,000 for healthcare expenses in retirement

  • During WW2 in the U.S., the daily cost of staying in a hospital room could be as low as $100 in today’s dollars

  • Today, this cost is typically going to run you a few thousand dollars, and yes, we are still talking per day

  • In the past 20 years, healthcare spending in America has had a net increase of over a trillion dollars

  • The total value of all HSAs in the U.S. today exceeds $64 billion, with this number being only $1.7 billion in 2006

    • While it is good that this statistic shows more awareness and usage of HSAs, much of this could very well be the result of how many U.S. citizens struggled with healthcare costs and financial disaster, especially during the 2008-09 recession

    • It’s also clear and inevitable that many will struggle with these costs with the combination of poor planning and resources and the pandemic and economic downturn we are currently facing

  • Less than 10% of Americans use HSAs while nearly 50% of U.S. households use mutual funds in other forms (401k, IRA, etc.)

  • Using the total value of all health savings accounts in the U.S. of around $64 billion, this number roughly equates to the total market capitalization of Cigna Corp, which is only the 27th largest individual publicly traded healthcare company

    • This is just a specific example, but in a “fight” between common citizens and healthcare corporations, it seems like the corporations are winning

Is a HSA right for you?

Remember, to be eligible, you must have a high-deductible health plan. This does not mean that every person who has this type of health plan should be starting and funding a HSA with us right away. Just like with any other client or potential client, using Dave’s baby steps is the simplest yet most effective place to start. We are focusing on expressing the value of starting HSAs with us for specific clients who are on or past Baby Step 4. As a reminder, baby step 4 involves contributing 15% of annual income towards retirement, with baby steps 5 & 6 consisting of saving for children’s education and paying down a house mortgage early. Depending on the specific client’s circumstances, baby steps 4-6 can be taken on simultaneously, and some situations will cause a client’s needs to place more priority on baby steps 5 & 6 before thinking about a HSA. However, here are some hypothetical situations to put some of this into perspective:

  1. A high-income client is on baby step 4 (15% income towards retirement), is contributing up to the employer match on their 401k, is also contributing the maximum annual limit to a Roth IRA, and still has some chunk of that 15% to put towards retirement

    1. Depending on the situation, the recommendation may be to fund or increase contributions to an HSA or contribute the remaining chunk back to the 401k

    2. It is so important to consider the HSA for clients that are eligible because of the triple-tax savings and high flexibility of the account itself

  2. Employers have been shifting healthcare costs to employees over the years, but some may still be able to get matching contributions from employers for HSAs

    1. Just like with a 401k match, this needs to be thought of as free money or guaranteed 100% return on your money

  3. For those who can easily use their typical spending budget for prescriptions and routine doctor’s visits but still want to feel protected with the safety net of a HSA, you can reimburse yourself out of your HSA for qualifying expenses at a later date, even years later, which allows for your account to continue growing without withdrawal disruption


Hopefully you as the reader now have a good idea of what health savings accounts are and the suitability and benefits of using them. If you are eligible and interested in opening a HSA with WMWM or even just interested in learning more or asking questions, please contact us and we would be more than happy to help for potential and existing clients!


August 28, 2020

Amanda Sharratt

Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm.  The information presented is for educational purposes only and intended for a broad audience.  The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed.  Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner. 

Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed. 

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