Help Santa avoid taxes [Certain Times]

Doing some last minute holiday shopping?

You know there’s only 9 days until Christmas, right?

Well, you might want to put one more thing on your list…

     “Contribute to my HSA”

What does HSA stand for?

It might as well mean “Help Santa Avoid taxes” but it really stands for Health Savings Account.

About once a week I get an email, a phone call, or even a carrier pigeon bearing a question from the North Pole about Health Savings Accounts and there’s a TON of confusion. So let me see if I can clear it up.

1. HSA ≠ FSA. A Health Savings Accounts is NOT the same thing as a Flexible Spending Account for Healthcare. The FSA has a use-it-or-lose-it provision. The HSA does not.

2. Gotta get the HDHP. If you don’t have a High Deductible Health Plan, you don’t qualify to contribute to an HSA. If you’re swapping health plans, keep this in mind.

3. It’s almost New Year’s! You can only contribute to your HSA during the calendar year, which is almost up. It’s not like an IRA where you can contribute up until the time you file your return.

So why am I pounding the table about HSA’s?

They are the best tax savings vehicle a physician can have. The contributions are tax deductible. The interest grows tax-free. And qualified distributions are tax-free, too. Read that as “save tax, no tax, no tax”.

The contribution limit is $6450 this year for families, $3250 for single filers. That will save most families more than $2000 come April.

So what’s the catch?

The High Deductible Health Plan is not for everybody. If your family has a history of chronic illness, then the tax savings are probably far less than the out-of-pocket medical expenses you may bear. For everyone else though, they’re a pretty good deal.

And I have one last tidbit on HSA’s. DON’T SPEND IT! Let your money grow tax-free. Cover your out-of-pocket expenses using some other source. And if you have the option to actually invest your HSA, it’s a good idea.

IN THE NEWS

Professor Gene Fama, the 2013 Nobel Laureate in Economic Sciences, is widely regarded as the father of modern finance. His work is identified with the efficient markets hypothesis. His work has transformed the way people invest, including my clients who own DFA Funds managed by the mutual fund company he founded. Check out this recording of his Q&A at the recent Morningstar ETF Conference.

The Wall Street Journal tells you nothing is more important for investors than learning how much they can stand to lose. But nothing is harder to learn—before it’s too late. Check out So You Think You’re a Risk-Taker?

The Washington Post urges you to Find an Advisor Who Will Put Your Interests First. When seeking out advice, do yourself this favor: Find an advisor who is legally obligated to put your interests first.

GOOD TO KNOW

If you’re self-employed physician, consider setting up an Individual 401(k) by December 31.  An Individual 401(k) plan lets a self-employed person hit the $52,000 maximum retirement plan contribution with less income than a SEP IRA. It also allows a person aged 50 or older to put away $57,500 into a retirement plan for 2014.

Wishing you and your family a Happy Holiday.

W. Ben Utley CFP® Physician Family Financial Advisors Inc. Call: 541-463-0899 Be certain.™