White Coat Investor Podcast
Episode: WCI #426: A Deep Dive into HSAs
Release Date: July 3, 2025
Host: Dr. Jim Dahle

Introduction

In episode #426 of the White Coat Investor Podcast, hosts Dr. Jim Dahle and Katie delve deep into the intricacies of Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs). This comprehensive discussion addresses listener questions, explores the functionalities and benefits of HSAs and HRAs, and touches upon related financial planning topics relevant to medical professionals.

Understanding HSAs and HRAs

Listener Questions and Host Insights

The episode begins with a listener, Dr. Dali, inquiring about maximizing HSA contributions with a current employer before transitioning to a new job that offers an HRA.

Dr. Dahle ([03:36]): "HSA is a health savings account. It's an individually owned investing account where you have the money forever."

Katie ([05:04]): "We've been using an HSA for the last 15 years... it's an investing account. The money grows, and you can invest it aggressively if you want."

HSAs: Features and Benefits

• Triple Tax Advantage: Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
  Dr. Dahle ([05:53]): "It's triple tax free."
• Investment Flexibility: Funds roll over annually and can be invested in various financial instruments, similar to an IRA.
• Ownership and Portability: HSAs are individually owned, allowing portability across employers.
• Inheritance Considerations: While HSAs can be passed to heirs designated as beneficiaries, they become taxable income to the heirs, making them less favorable for inheritance compared to traditional IRAs or Roth IRAs.
  Katie ([07:07]): "HSA is a crappy account to inherit... if you're planning to leave money to charity when you die, HSA is a great account for that."

HRAs: Overview and Comparison

• Employer-Funded: HRAs are funded solely by employers and cannot be contributed to by employees.
• Use-It-Or-Lose-It: Similar to FSAs, unused funds may not roll over depending on the plan.
• Integration with HDHPs: Often paired with High Deductible Health Plans (HDHPs) to lower out-of-pocket expenses.
• Contribution Limits: Generally higher than HSAs, with specific limits based on employer offerings.
  Katie ([10:14]): "The accepted benefit is $2,150. There's also a qualified small employer option with higher limits."

Dr. Dahle ([11:15]):

"So for the second half of the year, use that HRA. But with HSAs, you're only allowed to contribute enough for the months you're covered by an HDHP."

Addressing HSA Tax Implications

Another listener, Patrick, raises concerns about reimbursing an HSA after receiving a partial refund for a medical procedure.

Patrick's Dilemma ([12:58]):

I paid for a procedure with my checking account and reimbursed myself from my HSA. Later, I received a partial refund and am unsure how to handle it without incurring taxes.

Hosts' Discussion ([13:52] - [17:14]):
Dahle and Katie discuss the complexities of such situations, acknowledging the lack of clear regulations and advising flexibility:

• Best Practice: Deposit the refund back into the HSA to maintain tax benefits.
• Alternative: If returning funds isn't feasible, use the refund for other medical expenses or report it as taxable income.

Katie ([16:17]):

"The best practice is to deposit the refund directly back into the same HSA account."

Survey Insights and Podcast Advertising

Listener Feedback

The hosts reference recent survey results indicating listener preferences for more in-depth discussions and fewer advertisements, particularly real estate ads.

Business Model Explanation

Dr. Dahle and Katie explain that the White Coat Investor operates as a for-profit business to sustain its offerings, including scholarships, educator awards, and widespread distribution of their financial guides.

Katie ([19:08]):

"We have the White Coat Investor Scholarship... We give away tens of thousands of dollars to medical students to reduce their indebtedness."

Real Estate Advertising

They address questions about the prevalence of real estate advertisements on the podcast, outlining their selective approach to sponsorships:

• Selective Vetting: Preference for reputable real estate sponsors to ensure quality and reliability.
• Investment Focus: Emphasizing real estate as a viable investment option complementing index funds and bonds.

Katie ([26:44]):

"We want to create win-win solutions for everybody."

Dr. Dahle ([31:09]):

"But it's optional. It is, however, kind of a rich person's game... You almost have to be wealthy first before you invest into private passive real estate."

Transitioning to Active Duty: Financial Strategies

A listener, Colin, seeks advice on managing his 401(k) and HSA while transitioning from civilian residency to active duty service in the Navy.

Colin's Question ([40:48]):

I have a 401k with $40,000 and an HSA with $10,000. Should I roll over my 401k into the Thrift Savings Plan (TSP) and what should I do with my HSA?

Hosts' Advice ([41:44] - [58:45]):

• 401(k) Rollover Options:
  • Leave It: Keep the 401(k) with the previous employer.
  • Roll Over to TSP: Transfer to the new employer’s TSP for better management.
  • Roth Conversion: Convert to a Roth IRA for tax-free growth, especially advantageous if currently in a lower tax bracket.

Katie ([42:43]):

"You can put it into your Roth IRA. It's never going to be taxed again."

• HSA Management: Retain the HSA with existing investments or continue contributing if eligible under the new employer’s plan.
• Understanding TSP Funds: Detailed overview of TSP's various funds (C, S, I, F, G) and Lifecycle (L) funds, emphasizing low-cost, diversified investment options ideal for long-term growth.

Dr. Dahle ([50:57]):

"It's the Federal 401. Sometimes they're a little slow... but they've done a nice job over the years."

Conclusion and Final Thoughts

The episode wraps up with appreciation for listeners' service in the medical and military fields, encouragement to engage with the podcast’s resources, and reiteration of the episode’s key financial insights. Notable quotes from listeners and the hosts emphasize the value of informed financial planning and the unique challenges faced by medical professionals.

Katie ([58:15]):

"You need to get going and you need to start saving for retirement, putting money away, getting your full TSP match."

Dr. Dahle ([57:22]):

"While you're in the military, it's a great time to be doing Roth contributions."

Notable Quotes

• Dr. Jim Dahle:

  "It's triple tax free." ([05:53])

• Katie:

  "HSA is a crappy account to inherit." ([07:07])

• Dr. Dahle:

  "So for the second half of the year, use that HRA." ([11:15])

• Katie:

  "The best practice is to deposit the refund directly back into the same HSA account." ([16:17])

• Katie:

  "We want to create win-win solutions for everybody." ([26:44])

• Dr. Dahle:

  "It's the Federal 401... they've done a nice job over the years." ([50:57])

Takeaways

• Maximizing HSAs: Essential for medical professionals to leverage HSAs for their triple tax benefits and as a long-term investment vehicle.
• Strategic Transitions: Proper management of retirement accounts and HSAs is crucial when shifting from civilian to military careers.
• Informed Advertising: Understanding the podcast's business model helps listeners discern between educational content and sponsored advertisements.
• Investment Diversification: Balancing index funds with real estate investments can enhance portfolio growth and stability.

For more in-depth information and personalized advice, visit the White Coat Investor website or consult a financial professional.