Podcast Episode - Ask KT & Suze Anything: Can I Use my HSA While I’m on Medicare?

Children, Children And Money, Credit Cards, Investing, Podcast, Social Security

March 17, 2024

On this special Sunday edition of Ask KT and Suze Anything, Suze answers questions about when to collect Social Security, credit cards for teenagers, LIRPs as investments and so much more.

Listen to Podcast Episode:

Podcast Transcript:

Suze: March 17th, 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Now, I know, I know...

KT: KT's here. Tell them why.

Suze: Well, first of all, KT, do you even know why?

KT: Yeah, it's Saint Patrick's Day.

Suze: That isn't why I asked you to do...

KT: No. On Thursday we played the most incredible, amazing interview with Suze and Mika at the 30/50 summit in Abu Dhabi. Anyone that's missed that, go back and listen to it. It was, it was so great that I didn't need to be on it.

Suze: No, that's not why you're here. Let me tell you why you're here. First of all, Happy Saint Patrick's Day, everybody.

Suze: Today is a special day for KT.

KT: So today was it 14 years ago, 14 years ago, my mommy died and on Saint Patrick's Day. But you know what? We really celebrated, we celebrated because we thought it was pretty amusing that she picked the most, one of the most festive and fun days of the year to leave us.

KT: And she went and decided I'm gonna pick this day and go have a party up there in heaven and I'm sure she still is.

Suze: But let me tell you, KT, why I asked you to do Sunday with me ready for this, right? So a little bit ago before we went away, one of the quizzes from somebody by the name of Dennis was Suze. We know everything about you. Tell us something about KT and that was the quizzy, and KT told her story.

Suze: Well, KT, the number of emails and comments that I got about how much everybody loves you and they love knowing your story and they found it so fascinating, so interesting and we miss her because really the last few podcasts you haven't been on everybody's been asking for.

KT: So today's Sunday, it's a special treat. It's Saint Patty's Day, it's Sunday and KT's in the house with Suze.

Suze: So KT's gonna do an ask KT and Suze Anything since we didn't do it for you Thursday.

Suze: But we're so very, very happy to be back. We're happy to be back on the island, right? And KT gets to go fishing. 

KT: As soon as we're done with this. I am jumping on that boat and going fishing and I hope you join me.

Suze: We'll see how I feel. What do have for me?

KT: So, the first question we have is actually a comment. 

KT: Hi, Suze. I'm planning to retire this coming August. I will be 68 years old in June. She's probably a Gemini like you. Is it better to delay getting my social security till I'm 70? I have some annuities and pension that I can start getting. And I think that would be enough for me for the next two years. What do you think, Suze? This is from a Susan to a Suze.

Suze: That should have been your quizzy. So here is the bottom line answer here because you are single because we don't have a spouse to contend with in terms of what the spouse would be getting as social security.

Suze: You absolutely should be waiting till you are 70 years of age. If you could wait till 70 I'm telling you, you're going to be so happy that you did. All right, next question, KT.

KT: Ok. From DC.

KT: Hi, Suze and KT. Suze mentioned multiple times how an Oprah staff sold a million dollars worth of Apple stocks without paying any capital gains tax because they were not working for a year and had no taxable income. DC goes on to say love that. But when I went to irs.gov, they mentioned the zero tax rate applies, if your taxable income is less than $44,000. Wouldn't the million dollar investment gain count as taxable income? And wouldn't you need to pay tax for any additional gains above $44,000? I hope I'm wrong because this is such a fabulous idea.

Suze: You are so wrong, It's not even...

KT: By the way, DC says, Suze, I love you since, "Can I Afford It."

Suze: Well, you're denied this question. So first of all, let me just give you an example of what happened here with my friend. It was, I think about two or three years ago when she had a million dollars worth of Apple stock and Apple was selling at about $165 a share. At that time, KT, if my memory serves me correctly.

Suze: And she had approximately 6000 shares. But back then when she was going to sell the stock, she had absolutely no income whatsoever. It's true that the only income she did have was from the dividend that Apple paid, which I think was like 20 cents a share. So maybe she had $1200 of income from dividends that were paid.

Suze: And even though she had money in a savings account, back then savings accounts, whether you know it or not were paying nothing, so she really had absolutely no income whatsoever. So back then, if you made under about $41,500 of total taxable income, then if you sold something like a stock, no matter what the gain was in that stock, you wouldn't have to pay any capital gains tax whatsoever. And that's exactly what she did. So, no, you are incorrect, my dear DC. In that the stock doesn't apply, that's not taxable income. She owned the stock for a long time, more than a year. So if you own it more than a year, then it's taxed to you as a capital gains tax, not an ordinary income tax. So she owned it more than a year. So she qualified for capital gains tax. You have it wrong.

Suze: So, however, what you do need to know right now is that starting in the year, 2024 it's not $44,000 anymore or under that, it's $47,025. So if you have total income, including everything under that amount of money and you own a stock that you've owned longer than one year or an ETF or a mutual fund and you sell it no matter how large the gain, you will pay zero capital gains tax. Just that simple. But from 47,000 something like $27 all the way up to like $518,900. If you sell between that and that's your total income, your capital gain would be 15% anything above $518,900. You're at 20% plus a 3% this and 3% that so, but if you're under that $47,000 for this year in total income and you sell a stock that has a capital gain, you aren't paying a penny of tax on it.

KT: It's good to know. It doesn't apply to me though.

Suze: That's never our situation.

KT: I was gonna say it doesn't apply to me. Ok. Next one's from Scott. This is interesting. Hi, KT and Suze. My daughter is 16. Ok. Everyone remember she's 16, she'll be going to Spain this summer with her school. With regard to her method of spending, bank debit cards typically have a foreign transaction fee while many credit cards do not. Do you prefer building credit for a minor with a parent who will ensure nothing will go amiss? What is the best way for a minor to get a credit card which then can be used for daily expenses ongoing and paid off monthly of course.

KT: So this is from Scott, but can a minor get a credit card?

Suze: Well, here's what this minor needs to know. And Scott, which is if you just simply add your daughter's name as an authorized user on one of your cards that does not have a foreign transaction fee attached to it, then she can start to hopefully build credit because your FICO score will then become her FICO score as well. So that would be a great way if no other reason to not have to pay that transaction fee because it can be expensive over there. Like KT and I were very careful about when we just recently were overseas, which credit card we used because we wanted to make sure that we didn't have that transaction fee. So if you know that your daughter is responsible, then give her a credit card that she can use as an authorized user. One of your credit cards that doesn't have a fee on it and just watch it closely. Next question, KT.

KT: This is from Julie. Hi, Suze. I bought a home at the age of 20. I'm 47 now.

KT: I still have a mortgage, but I'm wanting to move as my partner has their own home. Would you suggest selling my home or using it for rental property? And thus monthly income? By the way, I have a Secure Save account at Humana. Wait before you answer this question, tell everyone what the Secure Save Account is.

Suze: The new love of my life.

Suze: That is really great and good for you, Humana. Yeah. So if you don't know a few years ago, three years ago, now myself and two other men by the name of Devin Miller and Bassam Saliba co-founded a company by the name of Secure Save and all of you should absolutely check it out at Secure save .com

Suze: and essentially what it is, it is an employer-sponsored emergency savings account for the employees. And therefore you will decide if your company comes with us and does this that how much per paycheck you would like to be taken out of your paycheck? Most people only do $20 or $30 a paycheck and your employer will match it for Humana. They have 50,000 employees, 71% of their employees have signed up for Secure Save and Humana, like many companies that have signed up with us, they are offering $100 for their employees to simply sign up if they sign up for $20 and then every $20 that employee puts in Humana matches $20. And what's so fabulous about it is that the employee can get the money whenever they want with the push of a button. They don't have to ask their hr person if they leave, let's say in this case, Humana, then they get to take it with them. It's their account. Everything about it is fabulous. 

Suze: But given that 75% of the people in the United States of America do not have  a $400 emergency savings account. That's why we started this and we didn't know if it would catch on if it wouldn't catch on. And let me just say it is caught on big time now with major, major corporations signing up with us. So if you're an employer listening to this, you should go to Secure save.com and check it out. If you're an employee that works for a corporation that has not done yet, talk to your hr person about it and have them go to Secure save.com or you go to Secure save.com, put in the name of your company and we'll contact them, but it's going to be a huge, huge thing. And I have to tell you one of the things that I'm most proud of, no fees at all to the employee, no cost to the employee. It's all your money. So, but let me go back to this one.

Suze: So Julie, first of all, you're so lucky that you work for Humana. What a fabulous company that they're doing this with and the benefits that they offer all of you over the top. However you say in your question that you want to move in with your partner, you did not say that you wanna move in with your spouse. You said you wanna move in with your partner. Fine. But that's because they have their own home.

Suze: What concerns me is if you weren't with this person and all of a sudden you break up with this person, where would you live? Where would you go? So for just now, I would be keeping your home and I would be renting it out. I don't want you to all of a sudden sell this house, take that money, maybe invest it with your partner in the house that they have. I don't want that at this point in time.

Suze: I want you to be further along with living with this person in their house. So given that rents are still so great and everything, I want you to keep it as a rental property in your name only obviously and use it for the monthly income. All right, KT.

KT: I picked this next one because it always makes me chuckle ready. It's from Joy Comments:

KT: I just attended an investment strategy dinner seminar in which LIRPs were discussed. What is, what is an LIRP? And is it a recommended investment strategy? So, wait, the reason It makes me chuckle, Suze. And I, as you all know, are up there in numbers in terms of our age and we get at least at least once a month, an invitation for a free lunch or a complimentary dinner at the Ruth Chris steakhouse here in South Florida to listen to investment strategy.

Suze: We should show, we were gonna show up one and scare the heck out of him because you know, we have to do that just to do it.

KT: We should, we should tape it and you should ask a question.

Suze: Like, why are you selling people LIRPs, which are the worst investments out there. First of all, Joy, here's what I wanna say, be very careful and this is for all of you when a company is offering a free meal to get you there, why do you think they're doing that? They're doing that so that they can sell you something and they know that all of you as you get older, you like a free meal. So fine if you wanna go and eat for free, I don't have a problem with that but you are not to on any level, do one thing that they talk to you about. Not one because I learned a long time ago that if a financial advisor has to entice you to come and listen to them speak, they're not a financial advisor, in my opinion that you really wanna be with because they need clients. 

Suze: A great financial advisor is so busy and so busy with referrals from the clients that they have, that they don't have time really to do anything other than what they're doing, which is taking care of business and taking care of your money, not going to give a talk somewhere and have dinner with all of you. So therefore you are to stay away from it, number one. LIRP stands for Life Insurance Retirement Plan. It, it is nothing more than an insurance policy that they, you to put your money into. So you can accumulate it and later on in life if you need it, you can take it out as a loan tax free. Here's what I would tell you. Stay as far away from it as possible. I don't like it. I don't like it. I don't like it and that is putting it mildly, KT next question.

KT: And by the way, Ruth Chris steakhouse is a great restaurant. Yeah. No, I mean nothing wrong with Ruth Chris. I love the lamb chops.

Suze: So you just go and get a doggy bag and take it home.

KT: Ok. Ready from Cecilia. Hi. Suze. I just heard your podcast on HSAs. Quick question. In 2012, I was working for HP - Hewlett Packard. They had to downsize and I was offered a package to leave. One benefit was an HSA account. I'm 66 years old and retired. I'm now on Medicare. Can I still use my HSA or do I lose it because I'm on Medicare? Thank you in advance for all of your assistance. Then she writes, ready? I love you, KT.

Suze: See, do you know how many people love you more than me?

Suze: Trust me. They say she's so sweet. She has an angelic voice. She's so kind. We love that. She cries. I'm like, I don't blame you. I love her for all those reasons too and she's absolutely 10 times sweeter than me. Maybe 20.

KT: That could be true.

Suze: Right?

Suze: But I have the biggest heart in town, don't I?

KT: Most generous?

Suze: So we make a great couple that way here. Cecilia is what you need to know. You can no longer contribute to your HSA and for those of you who didn't listen to my brilliant podcast on health savings accounts, you should, but you can no longer contribute to it because once you are on Medicare, you no longer can have a high deductible health plan. You just can't because Medicare is covering you. However, that does not mean that you can't use your health savings account and the money that's in there to pay for medical needs that maybe Medicare doesn't cover so you can't contribute to it, but you can still use it. You do not lose it, but you can't increase it with contributions. Next question, KT.

KT: I have a couple of HSA these are all following today.

Suze: I was thinking about before I wanted you to join me. I was thinking about doing a Suze School on all the questions of HSAs and clearing up certain things because we got so many questions. But then I thought I was lonely and I wanted you with me.

KT: But I picked three good ones.

KT: This one says, hi, Suze, loved your Susie School on HSA. And the question is pretty simple. What is the best way to fund my HSA?

KT: So that was the question and it was pretty straightforward.

Suze: Well, you know, it's interesting because that in itself is one of the most brilliant questions that you just asked and I realized I didn't cover that in the podcast, right? Because there is a way. So let's just say you have a high deductible health plan at work and now you have to fund it, you have to put money into it and you want money to go into your health savings account. That is how you fund a high deductible health plan. But when you fund it through payroll deductions. So, rather than taking money from a savings account or somewhere and funding it, when you fund it through payroll deductions, then the contributions get set up as pre tax, but they also exclude your payroll taxes, which is a big deal. So, KT every time you fund an HSA, it's a tax deduction.

Suze: However, if you're funding it with money that you've already gotten as a paycheck and now it's in a savings account and you fund it, ok, you get a tax write off for it. But if you fund it through a payroll deduction, it's also counted as pre tax income, but very possibly will avoid payroll taxes as well. Because when you get a paycheck, you get payroll taxes, that would be the most ideal way to fund it because in an HSA, even if you fund it with money from a savings account, you can't go back and retroactively get your payroll taxes back.

KT: What do you, what's the average monthly funding? It just, let's say it's $200.

Suze: It can be whatever they want up to the maximum. Right? So it's, it's, it just depends on, are they an individual?

KT: But it's better to take that money out of your monthly paycheck.

Suze: Yes. And fund it that way if you can, which you probably can. All right. And that was a great question.

KT: Yeah, that was a simple question. But you didn't cover that.

Suze: Well, I realized I didn't think about that.

Suze: No, but it's better to get it from your paycheck directly into your HSA than outside money funding your HSA.

KT: You won't forget to set it and forget it. Ok, Liz asks, hope you and KT had a great trip, a trip to Abu Dhabi. Did we?

Suze: What was your highlight for? Not about the conference? Right? But about what you saw the Abraham House?

KT: Oh, that probably was personally, I liked the oldest um structure, the oldest building which was a palace and it was the fortress to the mouth of the river into Abu Dhabi because of the history as a safe, you know, safe passage back in those days. But the Abraham houses which are new were three houses built perfect squares, same square footage and size. But they were, they were three buildings of worship, a church, a synagogue and a mosque and they are stunning.

KT: And the architect and the team that did this is just brilliant. His name is David. I can't remember. I'll have to look it up but unbelievable concept and it's all in one space. Within walking distance, these three squares, they're all in extremely contemporary design.

Suze: So if you're ever in Abu Dhabi, you should go there and take a look.

KT: And the Louver is was just brilliant. The Louver Museum stunning on the water as a big dome filled with moats. And I mean, it was just un unlike any museum I've ever seen. So, so yeah, we had a great trip. So quick question you mentioned about taking money out of an HSA once you are 65 without penalties. But would you have to pay taxes on it if it is for non medical expenses? What if I shoe box receipts?

Suze: Uh huh. Shoe box, there's a shoe box technique.

KT: Oh, I didn't. I'm wondering what that means. What if I shoe box receipts for qualified medical expenses that I paid several years before out of my pocket? Are those tax-free if I take it out in a different year than when I paid them? And how do I handle?

KT: Well, there you go. Everyone keep those receipts.

Suze: KT, here's the thing rather than using your money in an HSA to pay for qualified medical expenses. Sometimes people pay for them out of their own pocket and they let the money in the HSA grow and be invested. But if you keep all the receipts that you paid for, not with HSA money, but with your own money and you keep those receipts and they say if you keep it in a shoe box and you just save all of them, then later on in life, if you want to, as you're taking money out of the HSA for a non medical expense, a non-qualified medical expense, it should be, then you can use those receipts to make it. So you don't have to pay taxes on it.

KT: That's great.

Suze: Do you like that one? But yes, Liz, you absolutely can do that? Ok.

KT: And my final question is, hello, KT and Suze. This is from Jerry.

KT: Are retirement account, distributions, pension, beneficiary, social security, distribution, et cetera, tax based on the tax laws of the state where you reside in at the time of distribution or the state where the account was opened?

KT: Now, that's a great question. I wouldn't have a clue how to answer that. I have been a fan of yours since I came upon your book of the Nine Steps To Financial Freedom from the nineties. You have a gift and you continue to inspire us all, most especially women of a certain age.

Suze: Thank you, my dear Jerry, that's so sweet. So what I would be telling you is this does not matter what was the name of that tax. I have to think about this. I think it was called the Source Tax, KT from 1996. The source tax bill eliminated the ability for states to come and tax you um money that you earn from them even if you move to another state. And it came about so that California and New York couldn't come after you if you moved to Florida to get taxes for their state.

Suze: So Jerry, no, if you move to a different state than where you earn the money or where the pension is from, does not matter. You pay taxes according to the state that you are resident in.

Suze: Now, there are some exceptions to this with restricted stock units and things like that. But that's a whole another story. But with the things that you're talking about, which are pensions and social security and things like that, you live in a state that's tax-free and you earned it all when you were in New York. Guess what? New York? You are out of luck.

Suze: All right. So there's only one thing we want you to remember when it comes to your money and it is this people first...

Suze: Then leprechauns,

Suze: then money

KT: and you stay safe.

Suze: No, you forgot things, KT, then things. All right. You got it

KT: And Shamrocks.

Suze: Shamrocks and of course, if you do that, then you will be unstoppable.

Suze Orman Blog and Podcast Episodes

Suze Recommends

Suze Orman Blog and Podcast Episodes


3 Easy Financial Housekeeping Tasks with a Big Payoff

Read Now

Suze Orman Blog and Podcast Episodes

Podcast Episode - Ask KT & Suze Anything: Should We Buy or Rent When We Retire?

Read Now

Suze Orman Blog and Podcast Episodes


Your Ultimate Savings Opportunity Starts Now

Read Now