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Best Free HSA For Artists. Heart And Music.

Alright my savvy Creative Financiers.  Today we’re going to dive deep into the best free HSA for Artists, or Health Savings Account.  

We’ve spent a good many months laying the foundation for our path to financial independence.  I’m very excited to start to get into more nuanced ways and methods of saving and investing for the long-term.  The HSA is one of my very favorite investment vehicles behind the Roth IRA. (an account I think every working American over the age of 18 should be using).

An HSA is a retirement focused account that you deposit money into, and then have the ability to invest that money long term- with potentially triple tax advantaged growth.

That’s right folks, we’re talkin’ triples not doubles.

There are some simple requirements one must meet to be able to open one of these accounts.  And there are also some really awesome benefits to holding an HSA, including being able to withdraw money penalty free before retirement age for “health related purposes”.  We’ll go into all of that.

Navigating the world of personal finance, healthcare, and emergency funds can be a difficult task.  There are so many options available, as well as all kinds of dizzying information on the healthcare side.  Hopefully this post will illuminate a tool that can be useful to you now, sometime down the line, or way into the future.  

The History of HSAs

The HSA was created in 2003 so that individuals with “high deductible health plans” could receive a tax deferred benefit on money saved specifically for medical expenses.  

Let’s start with that term High Deductible Health Plan or HDHP.  You will need to be enrolled on one of these plans to be able to open an HSA.

For 2020, a HDHP is defined by the IRS as a plan with a deductible of at least $1,400 for an individual or $2,800 for a family.  However, these yearly out of pocket expenses can’t be more than $6,900 for an individual or $13,800 for a family.

How do I know if I have one of these HDHPs and qualify to open an HSA?

That info should be right on your insurance card- mine for example says “Individual/Family Deductible:”

I’ll say this again later in the post, but let’s take a moment to be clear: I’m not saying you should go off and sign up for one of these plans JUST to get access to an HSA.

Healthcare is such a fickle and confusing arena.  I know many factors go into selecting the best plan for you and your family.  If you don’t happen to have a HDHP that’s absolutely OK.  You might find that you do in the future, but for the time being stick with what works best for you currently.

It’s my understanding that if you receive your healthcare via Actors Equity Association / Cigna for example, you do not necessarily have a HDHP (check your OON Deductible).  However, given that there is limited to no performance work opportunities at the moment- you might find yourself visiting the Health Marketplace soon in search of a new plan.  

Now let’s say you do qualify for an HSA- let’s chat about what we like so much about this health specific retirement account.

Tell Me More, Tell Me More, Like Is It Like A Roth?

The HSA is a retirement account.  Much like our friends the IRA and Roth IRA, you can contribute money you earn, to then invest, compound, and grow long term.

The contribution limit for an individual in 2020 to an HSA is $3,550.  For a family that limit is $7,100.  You can also make “catch up” contributions after age 55 in the amount of an additional $1,000 per year.

Now those that remember reading about IRAs here at Creative Finance might ask right away:

Are those contributions pre-tax, or are they post-tax?

I’m so glad you asked!

If you contribute money you earn to your HSA, that is a pre-tax contribution.  Whatever you contribute in a year, you can deduct that total from your gross income on your tax return.

For example, I was recently working with a client, Miss Adelaide, who decided to open her own HSA (she gets sick constantly).

Adelaide made $50,000 last year at the night club.  She also contributed $3,000 to her HSA in the same tax year.

Therefore, Adelaide’s total reported gross income goes from $50,000 to $47,000 – lessening her tax assessment.  That means she potentially gets a larger tax refund, or owes less in tax monies to the government.

That’s why the HSA is a tax-advantaged account.  You are taking advantage of laws put in place to help your personal financial position, by investing this way.

Your employer can also contribute to your HSA if they choose to.  It’s not quite as common a benefit as 401k is, but some will do so- this is something you should ask about during any hiring process.

Much like the Roth IRA, any interest or earnings that happen inside of your HSA are tax free growth.

Wait a minute- you get to invest pre-tax dollars for a tax deferment, but ALSO grow your money tax-free with compound interest?!  I think I’m gonna like it here…

Remember earlier we talked about the “triple advantages” of this account?

  1. Money goes in pre-tax for a tax advantaged deferment.
  2. It grows tax free through investment and compound interest.
  3. Capital can be withdrawn tax free for qualified expenses (you probably have qualified expenses multiple times a year)

Furthermore, you can withdraw money from this account before retirement age for qualified medical expenses- and your withdrawal is both tax free as well as penalty free.  There is a long list of qualified medical expenses you can find here on the IRS website.

Just like other qualified retirement plans, there are penalties for withdrawing money early otherwise.  If you withdraw funds before the age of 65 for non-qualified medical expenses, you will incur a 20% penalty on the withdrawn amount.

Oh Wouldn’t It Be Lively

If you’ve gotten this far and are thinking this might be a good account for you- I’ve got your very next stop cued up.

I keep my HSA with a group called Lively, and I think they do a phenomenal job in making the user experience easy and manageable in every aspect.  I have no vested stake in promoting Lively here, I just think they’re great- and it’s who I use personally.

First off what I like about Lively is the individual plan costs $0.  That’s right, they will charge you no monthly fees to maintain your HSA with them.  We love free at Creative Finance.

Once you get logged in and set up, you will have a partner investment account with TD Ameritrade, which is one of the most trusted brokerage firms out there.  Much like the IRA, you will deposit your funds into your HSA, but then you will invest those funds through TD Ameritrade.

It might sound a little complicated.  I promise it’s not.  If you’ve been with us since the beginning, you know how to do thistake a refresher on investing in index funds!

Another amazing feature of Lively is you can record your medical expenses inside your portal, and even upload the receipt to link it to the expense- and Lively will store it for you, forever.

This is where you can really take advantage of those triple advantaged tax benefits.  Let’s say you have a medical bill that costs $1,000- and you decide to pay out of pocket (not from your HSA).  You can then earmark the cost of that bill in your HSA, and let that $1,000 continue to grow in your investment account- but withdraw it at any future time since it was once a medical expense.  You don’t need to withdraw money in the same year the expense occurred- it could be 5, 10, 20 years down the line.

Lively will also let you know how much you’ve contributed in a tax year towards your maximum of $3,550, and they’ll even send you an HSA debit card you can use to pay for qualified medical expenses directly from your HSA.

All of these factors make Lively one of the best free HSA for artists.

Finale Thoughts

Consider this: you’ve got the IRA / Roth IRA rocking and rolling already.  You’re consistently maxing out that account by putting away $6,000 per year, or $500 per month.  Amazing.

Now you add on the HSA, stashing away another $3,550 per year- and getting a tax deferment at the same time.  Awesome. 

You’re now saving and investing even more, which means your money is compounding faster, all while paying less in tax along the way.  Astounding.

If you only followed that simple strategy of maintaining both an IRA and an HSA, and maxing both out for a total of $9,550 per year- in 30 years assuming an 8% rate of return, you would be a millionaire.  And that doesn’t even account for an increase in contribution limits! (we expect they will continue to go up over the years).

This is super simple, methodical investing.  An HSA is a great addition to any person’s investing portfolio if you qualify for one.  How wonderful to have a retirement vehicle that can also double as a supplementary emergency fund for health expenses.

If 2020 has taught us anything- we know you have to Be Prepared.  And being prepared means being ready for anything life throws at us, while continuing to enjoy all the riches and things we love most dearly.  

I hope you enjoyed this guide to the best free HSA for artists.  Ya gotta have Heart and Music after all.

best free hsa for artists

best free hsa for artists

best free hsa for artists

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