Benefits of Owning Multiple IRAs or HSAs

Multiple IRAs or HSAs: What are the Benefits?

Patricia McCrystal

September 18, 2015

Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) are powerful tools investors can use to save and invest for retirement or qualified medical expenses, all on a tax-deferred basis. Many investors only open one IRA or one HSA account, not realizing they can open as many HSA and IRA accounts as they desire – and the potential benefits of doing so are nothing to overlook.

You can further the autonomy of your retirement account by opening a self-directed IRA or HSA. Self-directed accounts allow you to invest in nearly any asset you desire (with the exception of life insurance and collectibles). Self-directed IRAs or HSAs expand your investment horizons outside of the stock market and into any asset market in which you may already have knowledge and experience.

All HSAs and IRA account types have a yearly contribution limit that encompasses every IRA or HSA account you own; meaning your contribution limit remains the same regardless of how many accounts you open. However, there are strategic benefits to opening multiple retirement and HSA accounts. Multiple accounts allow you to maximize investment opportunities and diversify your retirement portfolio. Investing in more than one asset class provides autonomy from the potential volatility of any single asset market.

If it helps you to calculate potential returns for each asset, you may want to keep your assets in separate IRA accounts. Some investors prefer to open an IRA or HSA for every asset market in which they want to invest. Multiple IRA accounts can help you keep your assets organized in a way that makes sense to you. Additionally, if one or more of your IRA assets has more liability risk associated with it, your attorney may advise you to keep that asset in a separate IRA.

It’s logical to assume that multiple accounts would mean paying more in fees.  However, the reality is that each new account with New Direction only means a $50, one time fee to set up the new IRA.  In almost every case, the total fees thereafter are the same, whether you have one account or ten.

For instance, if you have an old 401(k) invested in publicly traded securities, you can keep some of the 401(k)  funds with its current provider, and open a self-directed IRA with New Direction to diversify and invest in alternative assets like real estate, private equity, or both – the combinations are limitless.

For HSAs, a tactic some investors may prefer is owning a “liquid” HSA with the amount of money he or she feels comfortable with, in the event of a medical emergency. With the money over and above the “liquid” contingency, investors can open one or more self-directed HSA accounts to invest in specific asset markets for long-term returns on a tax-deferred basis; thereby creating money for a lifetime’s medical expenses. Investors may have an HSA invested in stocks and bonds, and other accounts invested in precious metals or private lending; among many other asset options.

To learn more about opening self-directed IRA and HSA accounts, feel free to call New Direction or visit us online at www.ndira.com. 

Retirement Plan Integration with Self Directed IRAs

Whether you’re getting close to retirement age or you’re just beginning to look into retirement planning, it is important to understand how each type of retirement account fits into your overall retirement plan. Common retirement accounts, such as the Traditional IRA, Roth IRA, and HSA, each play their own role in a well-rounded retirement strategy. Knowing how to utilize each type of account will allow you to develop the best retirement plan for your personal retirement goals.

Each plan type offers a different tax advantage. Traditional IRAs are traditionally thought of as providing tax advantages when funds are placed in the account, and Roth IRAs delay the advantages until funds are removed from the account. While this is generally true, there are many factors that can affect the personal advantages of any particular account. These factors can include the age at which you plan to retire, your current tax bracket, the tax bracket you will be in post-retirement, the cost of living where you plan to retire, and the performance of other investments outside of your retirement accounts. A study of each account’s tax advantages and how those advantages will interact with the factors above may help you to create a personalized retirement plan.

For self directed IRA account holders, determining which accounts will best suit your retirement goals can seem complex. Just because you have a self-directed account does not mean you are alone on your retirement journey. SDIRA account holders can utilize the services of Certified Public Accountants (CPAs), Certified Financial Planners (CFPs), RIAs, trusted friends, and others to form a financial team. This team can help you discover the right combination of retirement accounts for your goals while you maintain the independence that comes with self-direction.

One account to consider for your well-rounded retirement plan is a Health Savings Account. An HSA can help you plan for those medical bills that may be incurred after you retire, allowing you to use your IRA funds to pay for other things. Not only can your HSA help you save for future medical costs, but you may also invest your funds to help grow your account’s value. The HSA also provides another advantage. After the account is opened, any medical costs incurred and paid out-of-pocket may be reimbursed from the HSA at any time in the future. Your financial team can help you determine how best to utilize a HSA as part of your plan.

New Direction IRA is proud to be a part of your personalized retirement plan. The self directed IRAs and HSAs we provide allow you to diversify your retirement investments, use your personal expertise to invest in what you know, and adjust to changing market conditions. We offer education to account holders and non-account holders alike, as well as providing continuing education to CPAs, CFPs, and other members of your financial team so you can make the best decisions possible for your self-directed retirement plan.

What's Better: An HSA or a PPO?

With the Affordable Health Care Act (Obamacare) taking effect, health insurance has risen to the national spotlight in the last few months. Americans have more choices than ever on how to be covered for medical expenses, so I thought it might be good to highlight the differences between two very different, but very popular insurance types: High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs) and PPOs (preferred provider organization).

First, the PPO. Like other insurance plans, it enables the account holder to choose his doctors and hospitals based on who will accept the insurance. PPOs will often have networks of doctors, specialists and doctors that the plan holder can work within or out of. If the plan holder visits out of network doctors or facilities, he’ll often have to pay a higher cost.

PPOs require premiums to be paid. Premiums are the cost of the plan and are typically (but not always) split between the employer and the employee in company situations. PPOs also have varying deductibles (the amount the plan holder pays in a given year) and lower deductibles typically indicate higher premiums. Deductibles range anywhere from $200 to $5,000 for PPOs.

The HSA operates differently. The HSA itself is not an insurance plan, therefore HSAs are couple with High Deductible Health Plans (HDHPs). The HSA is the pool of funds, then, that pays off medical expenses incurred in the HDHP.

HDHPs have little to no premium if offered by your employer and often the employer will contribute money to the HSA on top of that. Medical expenses incurred by the plan holder until the deductible is reach is paid by the account holder—typically via HSA funds. So if the HDHP’s deductible is $5,000 and the plan holder gets a blood test for $230, the plan holder would pay the full price. In the case of a bad medical year, the HDHP prevents against colossal medical costs by covering just about everything above the deductible limit.

What makes HSAs unique is how you can use the funds. First, any medical expenses incurred don’t need to be paid right away. You can actually pay those expenses out of pocket, keep money in your HSA and then reimburse yourself anytime in the future (as long as the expense is a “qualified medical expense” and you have the receipt.) Plus, when you use HSA funds for qualified medical expenses, you are achieving a discount on those expenses because it is not taxed.

And while those funds stay in the HSA, you can invest them in everything from stocks and bonds to real estate and precious metals. The flexibility of this account and the potential for massive growth attracts many people. It’s a great way to save on medical expenses and grow funds that can help in your retirement! If you still have funds in your HSA by the time you reach retirement age, you can distribute them like a normal Traditional IRA and use them for whatever you’d like.

For more information on HSAs or how they compare to other health insurance plans, visit www.NewDirectionIRA.com.