Retirement Planning – The Only Triple Tax-Free Way To Build A One Million Dollar Retirement Plan with Garrett Prom, CFP®, CRPC®

As a fee-only financial planner, I believe that the earlier you begin planning for your financial future the more likely you are to achieve your financial goals. And, if you are like most individuals seeking my services, you are seeking assistance with your investments. While investment selection and strategy is important, it is just one of many aspects that will impact your financial health and contribute to your financial future.

My responsibility is to ensure we work together to evaluate your entire financial life (retirement planning, budgeting, debt reduction, adequate emergency funds, children’s education, home and auto financing, insurance planning, work benefits, etc.) so that we create a cohesive plan and adjust that plan as needed to achieve your future goals.

For this reason, I specialize in working with Generation X and Y (Millennials), creating financial plans for my clients that are adjusted as needed throughout their life. My holistic approach and methodologies have been highlighted in Money Magazine, USA Today, US News & World Report, Investopedia, The College Investor, and I have also earned recognition as one of the “Top Financial Advisors for Millennials by Money Under 30.”

In this interview you will learn…

  • What is a medical ira?
  • Is an HSA different than an FSA?
  • What are the HSA tax benefits?
  • How does the health savings account work?
  • Are you eligible for the HSA plan?
  • How you can turn your HSA into a massive retirement planning opportunity?
  • Where should you open your HSA plan?

Interview Synopsis

Created in 2003, the Health Savings Account offers what is called a “triple tax free” advantage.  Contributions to the plan are tax-deductible, and they are allowed to grow over time tax-free.  This is in contrast to an investment or brokerage account, where your dividends would be taxed as your principal grows through compound investment.  Finally, medical expense withdrawals will be tax-free as well.

You may be wondering if you’re eligible for an HSA.  Most HSAs require the policy holder have a high deductible health plan.  However, there are often several additional underlying factors that are too complicated for Garrett to explain in the video, so he urges you to call your health insurance provider directly and ask if you qualify for an HSA. 

The maximum individual contribution limit for 2017 is $3,400, while the maximum family contribution is $6,750.  These amounts change almost every year as they are adjusted annually for inflation.  Much like an IRA, you are allowed to make “catch-up” contributions of $1,000.  With an HSA, however, you must wait until the age of 55 to make these “catch-up” contributions—5 years longer than the IRA. 

So where does the “one million dollars” come from?  As previously mentioned, contribution amounts increase directly as inflation increases.  Accounting for 2% inflation and assuming an average of 8% growth annually, your HSA should reach one million dollars after 30 years, as long as maximum contributions are made each year. 

Finally, Garrett STRONGLY RECOMMENDS you postpone reimbursement of those medical receipts until the age of 65.  You may be wondering, “Why in the world would I wait so long to seek reimbursement?”  Let’s say you go to the doctor and have a $40 copay charge for the visit.  If you were to pull money out of your HSA and use it to cover the cost, that’s $40 that could be using compound interest to grow annually over the next however many years.  After 27 years, that $40 would grow to equal approximately $320.  Take the hit to your wallet now, and you’ll thank yourself later.  However, use all means of precaution to preserve the receipts.  Save a hard copy as well as several electronic copies in multiple locations.  If you reach the age of 65 and somehow do not have any medical expenses to reimburse, you can withdraw the money from your HSA without any penalties.  Simply pay income tax on the amount and you can spend the money on whatever you like.   

As Garrett expertly explains, the HSA is an often overlooked yet incredibly valuable resource to you on your financial journey.  Find out if you’re eligible, contribute the maximum amounts, and save medical receipts for reimbursement so that you’ll have an extra “triple tax free” million dollars laying around when you reach retirement.