By Jamie Hopkins
Health Savings Accounts (HSAs) might be the single most powerful tax-advantaged savings vehicle in the IRS tax code. You can deduct contributions, experience tax-deferred gains and withdraw money tax free for qualified tax expenditures. It’s essentially a no-tax savings vehicle when used correctly. However, many Americans are missing out on this valuable tax planning, savings and investment option.
A recent report by HealthSavings Administrators shows many consumers and financial advisors don’t understand HSAs. In their survey, they found nearly 60% of advisors aren’t offering HSAs to their clients, roughly 26% don’t discuss HSAs with clients at all and 36% reported that they don’t understand HSAs. Furthermore, 40% of advisors claim their clients don’t understand HSAs either.
The lack of knowledge about HSAs leads to people underutilizing or improperly using them. The HealthSavings Administrators survey found 47% of advisors position HSAs as a short-term savings account. This supports research findings by the Employee Benefit Research Institute (EBRI), which found few Americans, roughly 5%, invest their HSA in anything other than cash.