Ep. 12 Vinny Catalano: Why is an HSA the most efficient tax advantage?

Saving for your health is actually a tax advantage!

An HSA (or Health Savings Account) is a savings account that is used purely for medical services. Unlike other accounts, you get a deduction on your taxes when you put money into the HSA and you don’t get taxed when you take money out of the HSA. It’s also not a use it or lose it system, it keeps “rolling over” forever. However, because of its tax advantages, there is a limit on how much you can put in. Depending on your health insurance, an HSA is a great supplemental tool to have.

Keep an eye out for your HSA options next open enrollment!

A few technical things: For 2026, the HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage. Individuals aged 55 and older can make an additional $1,000 catch-up contribution. 

Also, if you are taking any form of social security (Medicare Part A at 65 etc) you can no longer contribute to an HSA unless you are on an employer plan and actively waive Medicare Part A.

Disclaimer: This content is for educational purposes only. Please discuss your specific situation with your health benefits administrator or insurance provider for personalized guidance.

Transcript

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Welcome to the Clearly Beneficial podcast,

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the show where we rip off the Band-Aid and explore the future of healthcare,

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benefits,

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and the people driving innovation in the industry.

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and increasing organizational performance.

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To learn more how they can help you, visit healthnext.com.

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So Murphy and I are here today to talk to you about health savings accounts.

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So it's important to note that this week has been education week.

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So we talked about our annual out-of-pocket maximums, we talked about deductibles.

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And so waking up this morning, I'm like, what can we talk about today?

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I'm like, well, let's talk about health savings accounts.

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And so as you're going through your open enrollment,

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if you've probably already done so,

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but even if you haven't,

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this is a thing to consider.

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Health savings accounts are actually

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the most tax efficient account that is available to you beyond anything else you

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can put your money in.

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I'll repeat that.

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It's the most tax efficient account that you can have to put your money in.

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And why is that?

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So a 401k, a traditional 401k, you get a deduction.

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You don't get taxed on the money going in, but you get taxed on the money going out.

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In a Roth IRA,

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The money goes in,

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it's already been taxed,

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or a Roth 401k,

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the money's already been taxed,

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and you don't get taxed on the way out.

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Health savings account,

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on the other hand,

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is an account that you don't get,

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you get the deduction when you put the money in and you don't get dinged on the way

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out.

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So it's one of the only accounts out there that you get a tax advantage going in

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and you get a tax advantage going out.

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Pretty amazing.

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So let me just tell you how I use a health savings account.

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So I figured this out probably really only about five years ago.

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I was like, wait a second.

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So if I maximize the amount of money in my health savings account,

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what can you use that health savings account money for?

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First of all, it's your money.

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It's not use it or lose it.

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You get to keep it.

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It rolls over forever.

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And even when you turn 65 and go into retirement,

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you can still use money in your health savings account to pay for Medicare and any

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out-of-pocket medical expenses.

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But in the meantime, what I've used it for, honestly, is just another brokerage account.

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So when I had my money in my employer's HSA,

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I realized that they limited the number of investment choices that I had.

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They may have given me a couple of mutual funds or a few things that I could put my

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money in in the health savings account.

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But then once I left that employer, I'm like, well, where can I move this money to?

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So I actually opened up a Fidelity health savings account.

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And this is not an ad for Fidelity.

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I just happened to pick that one because I had other things over there.

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So I opened up a Fidelity health savings account,

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moved the money from the one health savings account into this one.

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And I literally just have another brokerage account that I can trade.

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Stocks,

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mutual funds,

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exchange traded funds,

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money market,

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all the things are available to me within the structure of that.

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And I just treat it as another retirement account.

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In the long run, because of its tax advantages, you are limited to what you can put in.

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So,

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you know,

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in this coming year,

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I think,

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and again,

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this is not exactly accurate,

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but in 2026,

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Someone for a family can put in $8,550, maybe $8,600.

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And then if you're over 50, you can add another $1,000.

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So I mean, there's definitely some flexibility there to add up to $9,500, depending on your age.

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a year, and that goes up every year.

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So the amount of money you can put in your health savings account goes up every year.

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So my strategy is,

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since I don't have a lot of out-of-pocket costs for healthcare,

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some prescriptions,

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this and that,

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I just keep putting money into the health savings account every year,

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maxing it out to the best of my ability,

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and not touching it,

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okay?

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Just because you have it doesn't mean you touch it.

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If you're gonna pay for a generic direct prescription,

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10 bucks,

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15 bucks,

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20,

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whatever you're paying,

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doctor visit 100 bucks,

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just use your Visa card and pay for it.

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I mean,

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you don't need to use that health savings account for health-related things until,

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you know,

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you're older.

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Or if a big issue comes up and you're out of pocket and you've got a big deductible

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to pay,

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and well,

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you could tap into that health savings account money.

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A couple of other subtle points.

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If your employer is contributing to your health savings account,

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that means that money they're giving you is immediately your money,

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okay?

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They give you a thousand bucks in the beginning of the year, that's your money.

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Develop a strategy to add to it.

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Even if you're gonna take a little bit less money in your 401k to max out your

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health savings account,

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Do it.

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OK,

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because the employer money and very few employers actually,

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I don't know,

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maybe larger organizations do contribute to health savings accounts.

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But this is something that is important.

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Don't be afraid of going into that high deductible plan with a thousand or two

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thousand or even a four thousand dollar family deductible.

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Match it up,

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take the money your employer's giving you in the health savings account and

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supplement that with your own money,

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even if you're just doing it on a paycheck to paycheck basis if you can.

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And then I'll tell you what,

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if you are a Gen Z,

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you're a millennial,

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you're Gen X,

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when you're 65 years old,

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you're gonna thank me.

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Vinny said this and I did it and pretty smart thing to do.

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So I would encourage you to participate in your health savings account and play by

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Vinny's rules.

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Take care.

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This podcast reflects the personal views of the host and guests,

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not their employers or sponsors.

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See you next time.