The Best Way to Use a Health Savings Account!

June 15, 2023

In this highlight, we discuss how to make sure you are using your health savings account to it’s fullest potential.


Next up, we’ve got a question from Buff Lightyear. Buff, that’s for you. What a great username! What a great… I knew you would like that. But he’s also got a good question. It says, “Any tips on balancing choosing a high deductible health plan to be able to invest in an HSA, but then not wanting to use healthcare for elective checkups because of the out-of-pocket costs? I’m generally a healthy young guy.”

So when you’re thinking about different health insurance plans and investing in an HSA, and spending the out-of-pocket costs, how should he go about making that decision? Well, first, let’s discuss why is this an issue?

In my opinion (again, Brian’s not here to defend himself), I think that health savings accounts are the sexiest investment vehicle that exists in the financial realm. Because it’s like a Roth IRA, but it’s like a Roth IRA on steroids. Because you get a tax deduction on the front end, right? So if you were in the 4% of folks that do the triple tax advantage HSA, and by the way, did you know sometimes it’s quadruple tax advantaged if your employer allows you to do salary reductions into your HSA? You save on payroll tax too. So that’s a fourth tax savings. And you contribute and you get a front-end tax deduction, and maybe you get a payroll tax deduction as well. And you invest those dollars and not spend those dollars, they can actually grow tax-deferred through time. So you’re not paying tax on them while they’re growing. And then when you have medical expenses, you can then pull that money out for qualified medical expenses completely tax-free. So you get a tax break on the front end, sometimes two tax breaks on the front end, tax break while it grows, and then tax break while you pull it out. That’s why people get so excited about HSAs.

And if you’re a family plan right now in 2023, $750 is the limit. So it’s like you put more into an HSA than you put into a Roth IRA. So it’s a really great way to save for tax-free expenses. It’s actually why it’s number five on our Financial Order of Operations. Right? It’s why we focus on that being a tax-free account. If someone wants that, they go to money.com/resources. It’s free. Go grab it, moneyguy.com/resources.

So that’s why people love health savings accounts. In order to be able to take advantage of what I just described as the sexiest investment account in all investment account land, you have to be taking part in a high deductible health insurance plan. Well, high deductible means exactly what it sounds like. When you use that health insurance, your deductible is pretty high. So that means that you, as the member, as a participant, bear a lot of your health insurance costs.

Well, it’s not uncommon with large employers that you’ll have a number of different health insurance options available to you. You might have the deductible plan, but some plans, some companies provide really great Cadillac insurance, where it says, “Hey, if you’re under this plan and you’ve got to go to the doctor, a $10 copay.” You know, me and Brian talk about, you know, all of my kids, I’ve got a gaggle of them now. They’ve all been born under high deductible plans, and we hit our deductible, hit our out-of-pocket max. You’re talking about thousands upon thousands upon thousands of dollars that childbirth cost me and my wife. Brian, I think one of his kids, it cost him 10 bucks. It literally was they paid a co-pay because the type of insurance that the company was working for at the time. Crazy available. So while I love the fact that you can do a high deductible health plan and you can save in a health savings account, Cadillac insurance does exist. So don’t sacrifice the really good insurance option just in lieu of the high deductible plan.

So, Buff, here’s how you do your math. It’s pretty easy mathematics. You do a spreadsheet with three rows and two columns. You want to think about, one, what’s my monthly cost? What’s the premium cost for the high deductible plan? How much does the high deductible plan cost? How much does the other plan cost? Then you say, “Okay, based on the way that we use insurance,” you said, “Hey, I’m young and healthy. I don’t have very many visits. Maybe I get a cold once a year and I go to urgent care.” No, it’s $200 bucks. Okay, $200 bucks for urgent care on the high deductible plan, $10 office visit under the Cadillac plan. Then I factor in my tax savings from the HSA. I add up the difference of those three and I say, “Okay, which one’s more advantageous? Which one’s less advantageous?”

What you may find is that sometimes it switches. Sometimes a high deductible plan makes more sense, and then you get a bunch of tricycle motors. You’re going to the doctor all the time. Cadillac insurance is what makes more sense. So you have to make that decision to figure out which insurance should I go with. Young people, it’s really hard to shy away from high deductible plans because they’re less expensive on a monthly basis, and you get the tax savings. For more information, check out our free resources here.



Most Recent Episodes

What I Learned From Being BROKE!!! (And Why I Wouldn’t Change It)

No one disputes the fact that being broke isn’t great. We want to spread the word that no matter where you came from, you can build wealth. In this episode, Brian and Bo share personal stories about their journey to wealth and lessons they learned along the way....

Top 10 Mind-Blowing Money Stats (2023 Edition)

These 10 money stats will blow your mind! We’ll discuss the unbelievable amount of money Americans save, when most reach millionaire status, and how many Americans carry a credit card balance. Research and resources from this episode: Most Americans don't have enough...

Wealth Multiplier Revealed: The Magic of Compound Interest!

There’s a reason why Albert Einstein called compounding interest the eighth wonder of the world! Do you know exactly how it works and how much your dollars could turn into by retirement? The Money Guy Wealth Multiplier can show anyone just how powerful every dollar...

From $0 to Millionaire in 10 Years (Is it Possible?)

How can you become a millionaire in 10 years or less? We’ll discuss common ways we see millionaires build wealth quickly, including through real estate, entrepreneurship, and the stock market. Discover how real wealth is built and why building wealth quickly may not...

Financial Advisors React to INFURIATING Money Advice on TikTok!

Brian and Bo are BACK to react to some more TERRIBLE financial TikTok advice! Join us as we take a look at some of the worst financial advice on the platform and tell you what to actually focus on in your own financial life. Enjoy the Show? Sign up for the Financial...

Investing Showdown: Dollar Cost Averaging vs. Lump Sum!

It’s a debate as old as time: what’s better, dollar cost averaging or lump sum investing? In this episode, we’ll cover the nuances and pros and cons of both, including in-depth case studies comparing investors at different times. Research and resources from this...

Is Inflation Really Ruining Your Finances? (You Won’t Like the Answer)

Inflation has changed our daily living expenses dramatically over the last few years. While we can’t control all of our expenses, there are many things in your control that can help you become a Financial Mutant and build wealth better than your peers. Enjoy the Show?...

Are $1,000 Car Payments Becoming the New Norm?!

New data shows more Americans than ever have car payments over $1,000. Is this becoming the new normal? How much could having a car payment of $1,000 be costing you for retirement? For more information, check out our Car Buying Checklist!