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Quest Trust Company›Blog›Health Savings Account

Category: Health Savings Account

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Should You Invest Your HSA Funds?

Posted on March 2, 2020December 23, 2020 by dgmx

Image Credit: Epic Top 10 Site

Health Savings Accounts are perceived to be among the most tax-advantaged financial instruments. HSA helps people with high-deductible medical plans and controls medical costs. 

Unfortunately, most people are not aware that they can invest their HSA funds.

Like any other investment, investing in your HSA will help grow your money and boost your savings in the long run. Besides, HSAs are super-advantageous in terms of tax benefits because your money grows under tax-free conditions.

HSA investment

Investing in HSA means placing your funds in the form of bonds, stocks, mutual funds, etc. rather than letting the money sit to earn interest. These forms of investment allow for higher returns and are reliable long-term savings.

You can invest any amount you choose, though there is a minimum limit. This limit depends on the HSA provider and has to be met before investing.

Prioritizing your investment

Like every other financial adviser in the market, we would recommend paying for medical expenses from your pocket. Then, focus your HSA money as an investment. The HSA investment should be somehow similar to your IRA or 401k assets. Consider the investment to be an extension of other retirement savings you have and treat it as so.

A good strategy would be hoarding your medical receipts for when you get paid in cash. These receipts will be helpful should you need to reimburse yourself when in need of the HSA funds.

Should you invest your HSA Funds?

If you are financially stable, investing your HSA funds should be a consideration. It is an investment that works best if one doesn’t depend on the funds to cover medical costs. For instance, if you are healthy and rarely visit the doctor.

Also, it is a good option for anyone who has the available cash flow to pay any medical expenses. However, if you live paycheck to paycheck or have a terminal condition that requires frequent visits to the doctor, HSA investment might not be the best option for you.

Conclusion

Turning your HSA funds into an investment is a smart and reliable move for most people. Before investing, ensure you are in a position to cater to your medical expenses without withdrawing from your funds. Contact Quest Trust Company today to open an HSA account.

Posted in Health Savings Account, Health Savings Account (HSA), HSA The Best of Both WorldsLeave a comment

HR 1865 SECURE Act Provisions Summary

Posted on January 16, 2020July 14, 2020 by Quest Trust Company

Title I – Expanding and Preserving Retirement Savings

Sec. 101. Unrelated small employers may now join together in defined contribution Multi-Employer Plans (MEPs), starting in 2021.

Sec. 102. Raises the cap for automatic enrollment cap in employer-sponsored plans from 10% to 15% of pay after 1st plan year.

Sec. 104 Small business owners with up to 100 employees may receive a TAX CREDIT for starting a retirement plan, up to $5,000 ($250 per non-highly compensated employee). 

Sec. 105 Plans with automatic enrollment may receive an additional tax credit of $500.

Sec. 106 Includes in the definition of “compensation” for IRA purposes certain taxable non-tuition fellowship and stipend payments to aid the individual in the pursuit of graduate or postdoctoral study. 

Sec. 107 Age limit for making IRA contributions is repealed beginning with contributions for 2020. The age limit remains for contributions for 2019, but as long as you have working income you can still contribute for 2020 and future years. The new law also allows spousal IRAs even if the spouse is older than 70 ½.

Sec. 109 Allows “lifetime income investment” annuities to be portable, so if you leave your job they may be rolled into another 401(k) or IRA.

Sec. 112 Part-time workers working at least 500 hours per year in the last three years must be allowed to set aside funds into a company 401(k), although the company does not have to match until the normal eligibility requirements are met. Previously employees working less than 1,000 hours a year could be excluded from the plan.

Sec. 113 Up to $5,000 tax and penalty free withdrawal if within a year of birth or adoption. You can repay these distributions as a rollover contributions to an eligible defined contribution plan or IRA. 

Sec. 114 Increases the age by which you must begin taking Required Minimum Distributions (RMDs) for those who turn age 70 ½ in 2020 or later. If you turn age 70 ½ in 2019 or earlier you still must take RMDs under the old law. 

Title II – Administrative Improvements

Sec. 201 Employer plans adopted by the filing due date for the year may be treated as in effect as of the close of the year.

Sec. 203 Increases transparency into retirement income with “lifetime income disclosure statements” similar to those sent by the Social Security Administration. These statements are intended to show how much money you could potentially receive if your 401(k) balance were used to purchase an annuity.

Title III – Other Benefits

Sec. 302 A 529 savings plan may now be used to pay off student debt, up to $10,000 over the student’s lifetime. A 529 plan may also be used to pay for certain apprenticeship programs.

Title IV – Revenue Provisions

Sec. 401 Beginning in 2020, upon death of the account owner, IRA must generally be distributed to non-spouse beneficiaries by the end of the tenth year following the date of death. This rule applies to 401(k)s and other employer plans as well. No particular schedule of distributions is required, as long as all of the funds are distributed by the deadline. Exceptions exist for “eligible designated beneficiaries” including 1) the spouse of the deceased account owner, 2) disabled or chronically ill persons (as defined), and 3) persons not more than ten years younger than the account owner. Minor children of the deceased account owner have an exception to the 10-year rule, but only until they reach the age of majority, after which the account must be distributed within 10 years. Once the eligible designated beneficiary dies, the account must be distributed within the 10-year period.

Contribution Limits for 2020

Traditional IRA – Up to $6,000 or $7,000 if you reach age 50 by the end of the year (same as 2019)

Roth IRA – Up to $6,000 or $7,000 if you reach age 50 by the end of the year (same as 2019)

Roth IRA Income Limits for Contributions:

If Married Filing Jointly or Qualifying Widow(er)

Less than $196,000 – Up to the limit

From $196,000 but less than $206,000 – a reduced amount

From $206,000 and above – Zero 

If Married Filing Separately (and you lived with your spouse at any time during year)

Less than $10,000 – a reduced amount

From $10,000 and above – Zero

If Single, Head of Household, or Married Filing Separately (and you did NOT live with your spouse during the year)

Less than $124,000 – Up to the limit

From $124,000 but less than $139,000 – a reduced amount

From $139,000 and above – Zero 

Simplified Employee Pension (SEP) IRAs – Up to $57,000 ($56,000 in 2019)

SIMPLE IRA – Employee salary deferrals can be $13,500 ($13,000 for 2019) or $16,500 if you reach age 50 by the end of the year ($16,000 for 2019) plus the employer contributes a matching contribution up to 3% of salary

401(k)/Profit Sharing Plan – Roth or Traditional 401(k) salary deferrals up to $19,500 ($19,000 for 2019) and catch-up contribution of $6,500 ($6,000 for 2019) if you reach age 50 by the end of the year plus an employer profit sharing contribution of up to $37,500 (based on your income) for a total of up to $57,000 if you are under age 50 or $63,500 if you reach age 50 by the end of the year.

Health Savings Account (HSA):

Self-only coverage $3,550 ($3,500 for 2019)

Family coverage $7,100 ($7,000 for 2019)

Catch-up contribution for those age 55 or older by the end of the year $1,000 (no change)

Coverdell Education Savings Account (CESA) – Up to $2,000 per child per year until the child reaches age 18 or if the child is disabled

Posted in 401k Education, Contributions, Coverdell ESA, Health Savings Account, Health Savings Account (HSA), How To Retire Well | Self Directed IRAs, Roth IRAs and Roth Conversions, Self-Directed IRA Contributions, SEP and SIMPLE IRAsTagged 401k education, Contributions, Coverdell ESALeave a comment

2020 Investment Account Contribution Limits

Posted on January 6, 2020July 13, 2020 by Quest Trust Company

If you have a 401k, SEP IRA, simple IRA, or HSA, you’ll be able to contribute more to your account(s) next year, which can help you build your retirement savings! The limit on contributions changes from one year to the next due to inflation. However, the limits don’t change every year, and this year they don’t impact all types of retirement accounts.

How have the contribution limits changed?

The contribution limits have increased slightly for some types of accounts, and they have stayed the same for others. 

2020 Investment Account Contribution Limits:

Account2019 Limit2020 Limit
Traditional, Roth IRA$6,000$6,000
ESA$2000$2000
401(k)$19,000$19,500
Individual HSA$3,500$3,550
Family HSA$7,000$7,100
SEP IRA$56,000$57,000
Simple IRA$13,000$13,500

What will these changes mean for investors?

These changes will mean that investors will be able to put more money aside for the future, which will lead to a potentially larger nest egg. 

Furthermore, it will help to reduce the tax burden on the retirement funds of millions of Americans. In fact, these changes have significantly increased the contribution limits for many investment accounts!

What changes can you expect in the future?

The contribution limits are expected to continue increasing in the future due to inflation. The specific amount that contribution limits will increase by depends on the inflation rate at the time as well as other economic factors, which are difficult to predict. 

Therefore, it’s important to stay up to date on future changes to investment account contribution limits, which will allow you to make the most of your retirement accounts every year.

Luckily, opening a Quest account can allow you to easily deposit checks into your investment accounts as quickly as possible, and we’ll do it for free within 24-48 hours. Furthermore, our specialists can ensure that you stay up to date on the latest contribution limits. So, open a Quest account today!

Posted in 401k Education, Contributions, Coverdell ESA, Health Savings Account, Health Savings Account (HSA), IRA Education, Roth IRAs and Roth Conversions, SEP and SIMPLE IRAsTagged 401k education, Contributions, Coverdell ESA, Health Savings Account, Health Savings Account (HSA), IRA Education, Roth IRAs and Roth Conversions, SEP and SIMPLE IRAsLeave a comment

How to Pay for Medical & Educational Expenses Tax-Free

Posted on November 22, 2018December 23, 2020 by Quest Trust Company

HSAs, or Health Savings Accounts, and ESAs, or Coverdell Education Savings Accounts, are both ways for consumers to invest in their future by putting money away for a specific purpose. While many people are aware of the existence of these types of accounts, not many consumers know the difference between them or how they differ from a traditional IRA. Here’s everything you need to know about HSAs and ESAs before making an investment.

What is an HSA?

A health savings account is a savings account where consumers can put away money for medical expenses that meet HSA qualifications. This essentially allows them to establish a rainy day fund for moments down the road where they need to cover treatments. However, here are a few factors to keep in mind when considering an HSA —

  1. A high deductible health plan, or HDHP, is required to qualify, and you do not qualify if you use Medicare currently.
  2. The account owner cannot be claimed as a dependent on another person’s independent tax return to have an HSA.
  3. An HSA is self-directed, meaning you can invest just like the other IRA’s.
  4. Unlike an FSA, the HSA is not a “use it or lose it account”. Funds contributed to an ESA continue to exist in the following year if no medical expenses were incurred.
  5. The contributions you make towards your HSA are entirely tax deductible and distributions are TAX-FREE for qualified health expenses.

So, if you are planning on saving for medical care anyway, there are many financial benefits to setting up an HSA.

What is an ESA?

Coverdell Education Savings Accounts (ESAs) are designated savings accounts that you can use to put away money for a beneficiary’s education. Unlike an HSA, an ESA can have multiple contributors, as long as their individual MAGI is less than $110,000, or $220,000 for couples filing together. ESA’s are often mistaken for 529 plans which unlike an ESA, is not self-directed. Also, 529 plans are state specific, where the ESAs are not.

ESAs are a good way for multiple family members to contribute to a child’s future and current education. The funds can be used for both elementary and secondary qualified expenses, like tuition, fees, books, room and board, and more. Even though contributions cannot be made after the beneficiary has turned 18 (unless they have special needs), you can still continue to invest the account and use that money for qualified education expenses until they reach age 30.

Interested in saving money for future health expenses? It’s easy to get started! Contact a Quest specialist today to learn more.

Take advantage of our Last Month Rule Promotion! Open an HSA account with Quest Trust Company by Dec 1st and get your Opening Fees waived.

Click here to Open an Account today!

Posted in Coverdell ESA, Health Savings Account, Health Savings Account (HSA), IRA DIstributions, IRA Education, Opening an IRA, TaxesTagged Health Savings Account, Tax Deduction, TaxesLeave a comment

Five Tips for HSA Holders

Posted on December 15, 2017December 23, 2020 by Juan Deshon

Health savings accounts come with many tax benefits and contribution benefits that create a separation between these kinds of accounts and IRAs that are self-directed. What are some ways you can make the most of an HSA?

Investing your HSA

An HSA can be invested in the same things that other self-directed IRAs and 401(k) plans can be. Options like securities that are publicly traded or options of alternative investment are all things that HSA can be invested into. Doing this will allow you to get the same benefits of retirement investing that is self-directed. At the same time, you will be able to get the benefits that an HSA provides.

Qualified Medical Expenses

When you get an HSA, you are given many different opportunities. A lot of the opportunities are very unique. Some of the opportunities allow you to make contributions that are tax-deferred and make distributions that are tax-free, but you can only do these things if they are used towards qualified medical expenses, or if you are paying the holder of the account for a qualified medical expense that was original paid for using money that you have pocketed. A lot of these options can be considered a QME, but distributing money to items that do not fall onto this list will get you penalized.

Strategize Decisions

HSAs will have the most chances to grow if the number of distributions are limited, just like any other investment plan. Try to personally pay for things like prescriptions or cheap QMEs, instead of using your HSA plan, as it will give your HSA more room to grow and more available for expenses that could come about later in life that are more expensive. It’s important to remember that you are not required to immediately distribute money from an HSA. You are allowed to delay the distribution to a time that you think will fit better.

Maximize Your Contributions

Using maximum allowable contributions to make your HSA stronger will make the potential for earning a lot higher and will allow you to take away an equal amount of your contribution from your taxes. A lot of employers are in the process of starting to offer HSA plans that are considered alternatives to PPO plans. Reviewing your options will be extremely beneficial to you, so definitely look into it and selected the option that has the capability to maximize contributions made by an employer.

Healthcare Consumption

With an HSA, it is important that you look into making comparisons between options for medical services and the costs of those so you can save money and help keep your HSA stable. It is recommended that you look into using services for preventative care that are free. It is also important to look into your health care habits and review those, so you can be somewhat prepared for how much of your HSA will be spent. Making positive changes to your life can also help you get a handle on HSA spending in the future.

Posted in Health Savings Account, Health Savings Account (HSA)Tagged hsa holders, tips for hsa holdersLeave a comment
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5 Steps to purchasing Real Estate, Notes, and other private investments in your self-directed IRA

Quest Trust Company makes the process of buying private assets with your self-directed IRA, smooth and painless. Take a look at these common investment options and the process by which to fund them.

See the Options

 

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