A Few Simple Tricks Turn Humble HSAs Into Wealth Builders
The $100 billion health savings account (HSA) industry offers significant financial planning opportunities for advisors and their clients, as only about a third of the industry’s assets have been invested, said a SAH specialist.
By the end of 2021, there were some 32 million HSA accounts in the United States, with more than $100 billion in assets, said Peter Stahl, founder of consulting firm Bedrock Business Results in Wayne, Pennsylvania, and Certified Financial and Healthcare Planner. specialist. However, only $34 billion has been invested.
“That’s a lot of money sitting around in cash,” he said during a presentation at Schwab Impact 2022 earlier this month. “It breaks down into two categories: those I call accidental hoarders and those who do deliberate planning.”
Deliberate planners, he said, recognize how these accounts can be used and who receive advice from an advisor. “And what’s happening there is huge.”
Rising health care costs are driving growth in the use of HSA, Stahl said. By 2021, average annual premiums for employer-sponsored health insurance had risen to $7,739 for a single person and $22,221 for a family, he said.
“Not only is it very expensive, but the price increases have been crazy,” he said, noting that family coverage has increased by 22% over the past five years and 47% over the past 10. last years. “This is one of the biggest challenges we face when it comes to saving and investing money as a nation.”
Several other important savings categories — like retirement, buying a home or college education, or all three — are being moved down the priority list due to the cost of health care, he said. -he declares. Health plans with high deductibles (and lower premiums) have provided some relief, but the real consumer benefit that can come with qualifying high-deductible plans is the use of health savings accounts.
They’re not a one-size-fits-all solution, Stahl said, because some consumers need first-dollar coverage depending on their medical condition, and not all insurance is eligible. But for customers who can use one, an HSA is a tax-advantaged savings and investment account used for medical expenses.
To qualify for an HSA, family medical coverage must have at least a $2,800 deductible with a maximum of $14,100 for annual expenses, and individual coverage must have at least a $1,400 deductible with a maximum. $7,050 for expenses.
For this year, the contribution limits are $3,650 for individual coverage ($3,850 for 2023) and $7,300 for family coverage ($7,750 for 2023). Additionally, there is a $1,000 catch-up provision for account holders age 55 and older.