Have you been contribution to a health savings account for some time? If you’re in good health, you may be sitting on a fairly substantial sum. According to information from the Employee Benefit Research Institute and the New York Times, an investor contributing the maximum allowable per year to an HSA and who only generated a modest average 2.5 percent return could be sitting on as much as $360,000, if they didn’t need to spend anything down. And if they got just 5 percent, that number could be as high as $600,000. A skilled Self-Directed HSA investor can do quite a bit with a sum that big.
Nationwide, health savings accounts represent a lot of capital: As much as $30 billion as of the end of 2015, according to the 2015 Devinir Market Survey. This $30 billion is spread across 1.7 billion assets. Both assets and account numbers are expanding rapidly as the combination of high deductible health plans and health savings accounts gain in popularity among both individuals and employers. This leads us to our next subject, Self-Directed HSA and Retirement.
The primary purpose of the health savings account is, of course, to pay unreimbursed health care expenditures for yourself and your family. Contributions are pre-tax, and any distributions taken to pay for qualified health care expenditures are tax free. Unused balances continue to compound tax free. But if you withdraw money from your HSA before you turn 65 for non-qualified uses, you will have to pay income taxes, plus a 20 percent penalty. That’s twice as big as the 10 percent penalty that normally applies to early withdrawals of IRAs and 401(k)s.
But once you turn age 65, all of that money is fair game. You don’t have to pay any penalties for withdrawals for any purpose after that age. You simply pay the income tax on the amount you take out. It’s just like having an IRA at that point – except expenditures for health care expenses are still tax-free! If you had to raid an IRA to pay medical bills, you’d still have to pay income taxes.
This is why an HSA is a terrific asset to own.
HSAs have only been in existence for a little over a decade. But as long as you continue to contribute and remain in good health – or use other funds to finance health care expenditures – there’s no reason you can’t amass an amount that will make a definite positive difference in your retirement.
And like an IRA, you can choose to self-direct your HSA assets.
How? Simply open an account with American IRA, LLC, and fund it with your HSA assets, generally via a trustee-to-trustee transfer.
Then just tell us what you want to invest in – whom to wire your money to purchase the investment, and how much.
So doing opens a whole world of investments to the Self-Directed HSA owner:
- Rental property
- Private lending
- Mortgage lending
- Hard money lending
- Tax liens and certificates
- Fixing and flipping real estate properties
- Private equity
- Venture capital
- Closely-held C corporations, LLCs and partnerships
- Oil and gas investments
- Farms and ranches
- Horse training and breeding businesses
- Fishing boats
- Offshore businesses
- Foreign real estate
- Collateralized debt obligations
And much more.
A few tips: Remember the primary purpose of the health savings account: To pay health care expenses, either before or after you turn age 65. Liquidity is a factor: Keep track of your maximum out of pocket expenses for your high deductible health plan, as long as you’re in one, or for your existing health care plan or Medicare, and try to have that much in cash, cash equivalent or something easily and quickly converted to cash so you can pay those expenditures in the current year.
To learn more about the self-direction option for your health savings account, call us today at 866-7500-IRA(472), or visit us online at www.americanira.com.
We look forward to working with you.